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Motorola Rides Strong Sales to Higher Profit
Apr 21, 2004
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Motorola said profits in the first quarter more than tripled because of a rebound in cell phone sales.

Motorola, the world's second-largest mobile phone manufacturer, is benefiting from renewed demand for high-end phones with cameras, color screens and other features, as well as growth in emerging markets. Its new line of upgraded phones, which it released late last year, has helped the company chip away at the share of the industry's number 1 player, Nokia. The companies run neck-and-neck in the United States, where handset shipments grew 13 percent last year.

Nokia, which is based in Finland, surprised investors last week when it said sales dipped 2.5 percent in the first quarter, raising doubts about its hold on the world cellphone market. In the quarter, Nokia encountered a problem that plagued Motorola last year: building and shipping enough new products to keep up with a surging market.

Motorola, based in Schaumburg, IL, U.S., seems to have solved that problem. In the January-March period, the company earned U.S. $609 million, or $0.25 a share. Sales jumped 42 percent to $8.6 billion, greatly exceeding expectations by analysts surveyed by Thomson Financial, who had forecast $6.74 billion in sales.

The company released its results after the market closed. During regular trading its shares fell 48 cents, or 3 percent, to $16.22. In after-hours trading, its stock surged as much as 23 percent.
The upbeat report was welcome news for Edward Zander, Motorola's chief executive, who took over the company at the beginning of the year promising to revive its sluggish performance.
While pleased by the surprising first-quarter numbers, Mr. Zander acknowledged that the company still faced significant risks from other mobile phone makers, and in other parts of the telecommunications industry. Besides Nokia, its rivals include Samsung and Sony-Ericsson.
"One quarter doesn't make much of anything," Mr. Zander said on a conference call with investors. "We have a lot more work to do. There's a lot of moving parts in the industry and a lot of competition."

Sales of cellphones jumped 67 percent in the quarter as the company rolled out higher-end handsets, many of which include cameras and color screens. Over all, Motorola shipped a record 25.3 million handsets in the quarter.

About 60 percent of all Motorola phones shipped in the quarter had color screens or cameras. The company also said it shipped 450,000 handsets capable of working on third-generation networks, which allow users to send and download data at faster speeds.

Motorola expects sales of $8.2 billion to $8.6 billion in the current quarter ending in June, and profits of $0.14 to $0.18 a share, excluding any impact from its semiconductor business, Freescale, which is planning an initial public offering. No date has been set for that offering.
The company expects sales of new handsets to surge 60 to 80 percent in the second quarter compared to the period last year.

Cellphones, which make up almost half of Motorola's sales, were not the only bright spot for the company in the first quarter. Sales grew by more than 10 percent in every other product division, including a 38 percent jump in the global telecommunications business.

Sales at Motorola's semiconductor group rose 21 percent, to $1.4 billion. The company is awaiting approval from the Securities and Exchange Commission before it sells a minority stake in the division to investors.

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