Motorola, Inc. (NYSE:MOT) today reported sales of $8.8 billion for the third quarter of 2007. The GAAP earnings from continuing operations for the third quarter of 2007 were $0.02 per share, which includes net charges of $0.04 per share related to charges associated with previously announced workforce reductions and a write-down of intangible assets.
“We are pleased with the improvement in the financial performance of mobile devices and we look forward to building upon the progress we have made,” said Ed Zander, chairman and chief executive officer. “We have strengthened our leadership position in broadband video, WiMAX, next generation government and public safety and the enterprise mobility markets. With our focus on these key opportunities and the initiatives we are taking in mobile devices we will further improve our performance and create long-term shareholder value.”
“During the third quarter, we maintained our focus on increasing cash flow, enhancing profitability and driving growth,” said Tom Meredith, chief financial officer. “We are beginning to see improvements in our cash conversion cycle and operating cash flow which will lead to increased financial flexibility.”
Operating Results
Mobile Devices segment sales were $4.5 billion, down 36 percent compared with the year-ago quarter. Excluding highlighted items, the segment incurred an operating loss of $138 million, compared with operating earnings of $843 million in the year-ago quarter. Motorola’s share of the global handset market for the quarter is estimated to be 13 percent.
During the quarter, Mobile Devices:
-- Shipped 37.2 million handsets -- including more than 900,000 RAZR 2
devices.
-- Introduced the MOTO U9 music device, a special edition RAZR 2 for the
holiday season, seven new W-Series handsets, and the iC602 dual-mode
iDEN/CDMA device.
-- Expanded the Z6 line with the introduction of ROKR Z6m and Z6tv.
-- Introduced an ultra high speed WiMAX chipset solution, optimized for
both size and low power consumption.
Home and Networks Mobility had segment sales of $2.4 billion, up 6 percent compared with the year-ago quarter. Excluding highlighted items, operating earnings were $165 million, compared with operating earnings of $231 million in the year-ago quarter.
During the quarter, Home and Networks Mobility:
-- Shipped its two millionth IPTV set-top device, just five months after
reaching the one million milestone.
-- Strengthened portfolio with several strategic acquisitions including
Leapstone Systems, Modulus Video, and Terayon Communications.
-- Conducted the world's first WiMAX 802.16e mobile handoff during the
WiMAX World Conference in Chicago.
-- Announced plans to divest the embedded communications computing
business for $350 million in cash.
Enterprise Mobility Solutions had segment sales of $2.0 billion, up 47 percent compared with the year-ago quarter. Excluding highlighted items, operating earnings were $336 million, compared with operating earnings of $280 million in the year-ago quarter.
During the quarter, Enterprise Mobility Solutions:
-- Launched MOTOTRBO, a dual-mode digital 2-way communications platform
that integrates voice and data, in key markets in Asia and Latin
America.
-- Awarded several county-wide public safety contracts in North America.
-- Shipped the one millionth MC9000, the industry leading rugged mobile
computer.
-- Started shipping the MC17 mobile computer, aimed at retail, in-store
applications for enhanced personal shopping experiences.
Outlook
The company’s outlook for earnings per share from continuing operations in the fourth quarter is $0.12 to $0.14. This outlook excludes any reorganization of business charges associated with the company’s operating expense reduction initiatives, as well as any other items of the variety highlighted by the company in its quarterly earnings releases.
Conference Call and Webcast
Motorola will host its quarterly conference call beginning at 7:30 a.m. Eastern Time (USA) on Thursday, October 25, 2007. The conference call will be web-cast live with audio and slides at http://www.motorola.com/investor.
Consolidated GAAP Results
A comparison of results from operations is as follows:
Third Quarter
(In millions, except per share amounts) 2007 2006
Net sales $8,811 $10,603
Gross margin 2,505 3,370
Operating earnings (loss) (10) 968
Earnings from continuing operations 40 727
Net earnings 60 968
Diluted earnings per common share:
Continuing operations $0.02 $0.29
Discontinued operations 0.01 0.10
$0.03 $0.39
Weighted average diluted common shares outstanding 2,318.4 2,476.8
Business Risks
This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to: (1) Motorola’s financial outlook for the fourth quarter of 2007; (2) future benefits from the steps Motorola has taken to strengthen its operational and financial performance; and (3) increased financial flexibility resulting from expected improvements in Motorola’s cash conversion cycle and operating cash flow. Motorola cautions the reader that the risk factors below, as well as those on pages 16 through 24 in Item 1A of Motorola’s 2006 Annual Report on Form 10-K and in its other SEC filings, could cause Motorola’s actual results to differ materially from those estimated or predicted in the forward-looking statements. Factors that may impact forward-looking statements include, but are not limited to: (1) the company’s ability to improve financial performance and increase market share in its Mobile Devices business; (2) the level of demand for the company’s products; (3) the company’s ability to introduce new products and technologies in a timely manner; (4) the company’s ability to continue generating meaningful savings from supply-chain improvements, manufacturing consolidation and other cost-reduction initiatives; (5) unexpected negative consequences from the company’s ongoing restructuring and cost-reduction activities; (6) the uncertainty of current economic and political conditions, as well as the economic outlook for the telecommunications and broadband industries; (7) the company’s ability to purchase sufficient materials, parts and components to meet customer demand; (8) risks related to dependence on certain key suppliers; (9) the impact on the company’s performance and financial results from strategic acquisitions or divestitures, including those that may occur in the future; (10) risks related to the company’s high volume of manufacturing and sales in Asia; (11) the creditworthiness of the company’s customers and distributors, particularly purchasers of large infrastructure systems; (12) variability in income generated from licensing the company’s intellectual property; (13) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings, including without limitation any relating to the Iridium project; (14) the impact of foreign currency fluctuations; (15) the impact on the company from continuing hostilities in Iraq and conflict in other countries; (16) the impact on the company from ongoing consolidation in the telecommunications and broadband industries; (17) the impact of changes in governmental policies, laws or regulations; (18) the outcome of currently ongoing and future tax matters; and (19) unforeseen negative consequences from the company’s outsourcing of various activities, including certain manufacturing, information technology and administrative functions. Motorola undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.
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