Motorola: We're already seeing 'slowdown' in sales due to Verizon iPhone

Motorola Mobility (NYSE:MMI) posted gains in revenue and income in its fourth quarter, but the company's first-quarter outlook--a net loss of $26 million to $62 million and consolidated operating earnings of around breakeven--spooked investors, who sent the company's shares down following the announcement.

Motorola's forecast of a difficult first quarter isn't a total surprise. CEO Sanjay Jha warned in December that Verizon Wireless' (NYSE:VZ) competitive actions in the first quarter of this year could have "an impact" on Motorola's financial results during the period. Verizon is set to begin selling the Apple (NASDAQ:AAPL) iPhone early next month.

Indeed, Jha said during Motorola's fourth-quarter earnings conference call today that the Verizon iPhone is already slowing Motorola's sales. "We have seen some slowdown as a result of the announcement at Verizon," he said, declining to provide details. Verizon announced earlier this month plans to sell the iPhone, after weeks of rumors about the move.

However, Jha argued that Motorola's Droid relationship with Verizon remains solid, and that Motorola could benefit from a potential influx of customers headed to Verizon stores for the iPhone.

Jha said Motorola also is working to expand distribution with additional U.S. carriers including AT&T Mobility (NYSE:T), T-Mobile USA and other carriers.

Motorola investors sent the company's stock down around 8 percent after the news, to around $32 per share.

In the fourth quarter, Motorola posted net revenues of $3.4 billion, up 21 percent from the fourth quarter of 2009. The vendor's earnings clocked in at $80 million, a reversal of the $204 million loss it reported in the year-ago quarter. Motorola split into two companies--Motorola Mobility (handsets and set-top boxes) and Motorola Solutions (infrastructure)--at the beginning of this year.

In Motorola Mobility's mobile devices division, net revenues in the fourth quarter hit $2.4 billion, up 33 percent on the year-ago quarter. The unit's operating earnings were $72 million, a reversal of the $166 million operating loss Motorola reported in the year-ago quarter.

Motorola shipped 11.3 million handsets in the quarter, of which 4.9 million were smartphones. According to analysts polled by Reuters, Motorola was expected to post sales of 5.2 million smartphones and total shipments of 10.7 million.

Interestingly, Jha said Motorola suffered "weakness" in mid-range smartphone sales at Verizon, T-Mobile and AT&T during the fourth quarter. "Consumers continued to buy high-end smartphones like the Droid X," Jha explained. He also said Motorola now counts 6 million MotoBLUR subscribers.

For 2011, Motorola expects to sell 20 million to 23 million tablets and smartphones. Jha said Motorola's Android-powered Xoom tablet will go on sale at Verizon in February.

According to ABI Research, Motorola was the world's eighth-largest branded handset maker in the third quarter of 2010, with shipments of 8.3 million units during the period. Motorola trailed ZTE and was just ahead of Huawei.

For more:
- see this release
- see this Reuters article
- see this FierceWireless Q4 earnings page

Related Articles:
Verizon unveils 10 LTE devices, including smartphones, tablets and hotspots
Motorola unveils Xoom, Android 'Honeycomb' tablet
Motorola splits into two companies, Jha pins hopes on Android
Moto CEO: 'Competitive dynamic' at Verizon could drag on Q1 results
Analyzing the world's 10 biggest handset makers in Q3

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