Motorola scores Q1 profit as smartphone sales rise

Motorola (NASDAQ: MOT) swung to a net profit in the first quarter, bouncing back from a year-ago loss. However, overall sales at the company's mobile devices division fell in the quarter despite a jump in smartphone sales.

Motorola chart The company, which said it is still on track to split into two publicly traded companies in the first quarter of 2011, posted a net profit of $69 million, a reversal of the $231 million net loss in its year-ago period. Motorola's company-wide net sales fell to $5.04 billion, down 6.1 percent from $5.37 million in the first quarter of 2009.

Motorola's handset unit posted sales of $1.6 billion, down 9 percent from $1.8 billion in the year-ago period. The unit's operating loss narrowed to $192 million, better than the $545 million operating loss in the first quarter of 2009. The company shipped 8.2 million units the quarter, down from 14.7 million in the first quarter of last year. However, Motorola shipped 2.3 million smartphones in the quarter, up from 2 million in the fourth quarter and above expectations of 2 million units. The company's average selling price jumped to $192, up from $169 in the fourth quarter, due to a higher number of smartphones. Indeed, all four of the Tier 1 U.S. carriers launched or announced Motorola's Android phones in the quarter, and the company also released phones with China Mobile, China Unicom and China Telecom; China is expected to be Motorola's second largest smartphone market this year after North America.

Motorola co-CEO Sanjay Jha, the head of the firm's mobile devices and set-top box units, said the company expects to ship 12-14 million smartphones this year, up slightly from the guidance he gave in the fourth quarter of 11-14 million units. He also reiterated his previous expectation that the handset unit would be profitable in the fourth quarter, and the company would release at least 20 smartphones this year. Jha said the company's feature phone sales will drop in the second quarter, and stabilize in the second half, but that Motorola is not going to be pumping significant resources into the segment.

Jha was asked whether the increasingly intense competitive environment in the Android market--where Motorola has placed its bets--will harm the company later in the year.

"We have taken the competition and the competitive environment into account when we provide you guidance," Jha said. "I feel that we are well positioned to compete at each of our carriers in light of the competitive environment. I think that my comfort level is greater today than it would have been last quarter."

Jha said that the company will continue to add features and functionality to its MotoBLUR user interface, including for multimedia and music consumption. Additionally, Jah offered some hints as to what kinds of products a converged company based around mobile devices and set-top boxes will produce.

"I anticipate that there will be a lot of media consumption devices that will be used in the home," he said. "We are very engaged with this marketplace." He said tablets are one potential form factor.

Additionally, Jha said Motorola is not currently in discussions with Microsoft over any patent-licensing deal. Microsoft announced Wednesday an agreement with HTC covering HTC's Android handsets that calls for the smartphone vendor to pay Microsoft royalties on the phones.

Motorola's stock was up slightly following its earnings announcement to around $7.20 per share.

For more:
- see this FierceWireless Q1 earnings page
- see this release
- see this Dow Jones Newswires article (sub. req.)
- see this Reuters article

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