Earnings reports

Moto Reports RAZR-Sharp Q4

Motorola Inc. (NYSE: MOT)’s fourth-quarter net income jumped more than 80 percent from a year ago, fueled by strong sales of its consumer-branded handsets, like the RAZR. (See Motorola Reports Q4.)

Excluding one-time adjustments, the Schaumberg, Ill., company earned a fourth-quarter profit of $1.2 billion, or 35 cents per diluted share, on revenues of $10.43 billion. That’s compared with a profit of $654 million, or 28 cents per diluted share, on revenues of $8.84 billion during the year-ago quarter. (See Moto Buys Swedish Set-Topper.)

Motorola's numbers were in line with analysts' earnings expectations, but just shy of Wall Street's revenue predictions. Analysts expected earnings of 34 cents a share on revenues of $10.5 billion, according to Thomson Financial Investment Banking/Capital Markets .

For the full year 2005, on a continuing operations basis, the company reported sales of $36.84 billion, compared to 2004 sales of $31.32 billion. The company reports earnings from continuing operations of $1.82 per share in 2005, compared to 2004 earnings of 90 cents per share. (See Motorola Unveils QIP Family.)

The strong showing was mostly attributable to handset sales. “With the handset we hit the ball out of the park,” Motorola CEO Ed Zander told analysts during a call Thursday. “We increased our market share again with a lot of cool and compelling products.”

Zander said 2005 was the “year of the RAZR,” and added “people keep asking me, ‘Wat’s after the RAZR?’ and I keep saying, ‘More RAZRs.' ” (See CES: Motorola & Google Button Up.)

Mobile devices sales in the fourth quarter hit $6.5 billion, or 60 percent of the company’s total sales. Motorola says it shipped 44.7 million mobile devices in the quarter, up from the record 38.7 million it shipped in the third quarter.

For the full year 2005, the company shipped 146 million handsets, an increase of 40 percent over 2004. Motorola believes it took 3.1 percentage points of market share away from leader Nokia during 2005 and now claims 19 percent of the market.

Argus Research analyst Jim Kelleher believes the secret to Motorola’s success was branding its handsets. “When you first hear about the ROKR and the RAZR, they’re names consumers can remember; when Nokia fires back with something called the 6601i, it doesn’t exactly roll off the tongue,” he says.

Motorola’s set-top box and network businesses didn’t do nearly as well as the cell phone business. Network infrastructure sales were $1.5 billion, down 4 percent compared with the year-ago quarter. And set-top box sales were $675 million, up just a percentage point compared with the year-ago quarter.

“In the fourth quarter we expected that the infrastructure and set-top box business would be down, and the broadband or set-top box business would be down sequentially,” says Deutsche Bank AG analyst Brian Modoff.

But Modoff believes there may be opportunity for the networking business in 2006. “We expect the overall mobile infrastructure business to grow in the 5 to 6 percent range in the year; should we see faster buildouts of 3G in China, India, and Indonesia, you could see growth rates reach 10 percent for the year." Whether or not Motorola would be able to get a significant chunk of that business is still unclear, Modoff says.

Motorola’s Zander told analysts his company expects sales of between $9.3 billion and $9.5 billion in the first quarter of 2006. He predicted earnings per share for the second quarter of between 27 cents and 29 cents. Analysts expect first-quarter earnings of 28 cents per share on revenues of $9.35 billion.

— Mark Sullivan, Reporter, Light Reading

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