Strong Android Sales Help Motorola Rediscover Its Mojo
After years of enduring an unfettered free fall, Motorola's mobile device business rallied to deliver a profit in third quarter, the first time that's happened in three years, almost exclusively on the back of strong demand for Android-based smartphones like the Droid X.
Motorola (NYSE: MOT) said its mobile phone unit returned an operating profit of $3 million in the third quarter, and shipped more than 9.1 million phones -- including 3.8 million smartphones. In the year-ago quarter, Motorola's mobile phone unit lost $183 million as the company continued to lose relevance in a market it once dominated.
In total, the Schaumburg, Ill.-based company pocketed $109 million, or $0.05 a share, on sales of $5.8 billion, up 6 percent from the third quarter of last year.
Excluding one-time charges and expenses, Motorola earned $0.16 a share, easily out-pacing the consensus analyst estimate of $0.11 a share.
The upside surprise was derived mainly from white-hot demand for its line of Android-based smartphones including the Droid, Droid X and the recently released Droid 2 on Verizon Wireless.
It also benefited greatly from a component of its business that will soon disappear: its network equipment division, which was sold in July to Nokia Siemens Networks for $1.2 billion. The unit contributed all but $7 million of the company's net income for the quarter.
Still, the robust sale of smartphones -- analysts were expecting the company to sell roughly 3.57 million units compared to the 3.8 million they sold-- has the unit well positioned for the eventual partitioning of the company into two units. One unit, Motorola Mobility, will encompass the smartphone and cable box business while the other, Motorola Solutions, will include police radios and other electronics equipment such as bar-code scanners.
Company officials noted that so far this year, Motorola pushed out 22 new smartphone models, including a trio of devices in China and while rumors continue to swirl about the possibility of Apple (NASDAQ: AAPL) bringing its iPhone line to Verizon Wireless, the company is confident that there's plenty of smartphone business to go around.
"Mobile Devices Droid X continues to sell extremely well, and we have had several other successful smartphone launches globally, including the Droid 2, the Ming series in China, as well as a well-received introduction of our enterprise-ready Droid Pro," Sanjay Jha, Motorola co-chief executive officer and Motorola Mobility CEO, said in a statement. "As we continue to make progress across the organization, we remain focused on further improving our financial results and pursuing the delivery of best-in-class software and hardware experiences to consumers and business users."
In fact, Motorola's plans for a tablet PC on the Verizon Wireless network could be just the elixir to offset any short-term negative effects of an eventual iPhone move to Verizon.
Meanwhile, the company is looking to strike up new deals of its own with the likes of AT&T, which provides service for its enterprise-targeted Droid Pro device.
"We expect to continue to have a meaningful relationship with Verizon," Jha told analysts during a conference call. "We think the Droid franchise is economically very valuable to Verizon. But we are also planning to diversify."
Motorola shares picked up $0.15, or 2 percent, to $8.24 in Thursday afternoon trading.