Moto Rides RAZR to Strong Q1
The Schaumburg, Ill., equipment vendor earned a first-quarter profit of $686 million, or 27 cents per diluted share, on revenues of $10.01 billion. That’s compared with a profit of $692 million, or 28 cents per diluted share, on revenues of $8.16 billion during the year-ago quarter. (See Moto Reports RAZR-Sharp Q4.)
The company says its earnings were compromised somewhat by "stock compensation expense" during the quarter.
Motorola's numbers fell short of Wall Street’s earnings expectations, but bested the analysts' revenue consensus. The Street expected earnings of 29 cents a share on revenues of $9.56 billion, according to Thomson Financial Investment Banking/Capital Markets .
As with last quarter, Motorola’s strong showing was mostly attributable to handset sales. Mobile devices sales in the fourth quarter hit $6.4 billion -- 64 percent of the company’s total sales. Motorola says it shipped 46.1 million mobile devices in the quarter, up from the record 44.7 in the fourth quarter of 2005 and 38.7 million in the quarter previous. More than 23 million RAZRs have flown off store shelves since their release in 2004. No injuries have been reported.
Motorola's network equipment business, by comparison, lacks luster. Network equipment sales for the quarter were $1.43 billion, down 14 percent compared with the year-ago quarter.
"We were disappointed by our Asia operations, especially in China," Motorola CEO Ed Zander told analysts during a call Tuesday. "We expect Asia to recover somewhat during the second quarter."
Motorola's networking performance takes place amid an accelerating merger and acquisition environment in telecom equipment. (See Siemens Comm Has M&A Callers.) J.J.B. Hilliard, W.L. Lyons Inc. analyst John Bucher believes Motorola is probably "surveying the landscape" for M&A opportunities that might strengthen its infrastructure business. Some analysts believe a sell-off of that business is not entirely out of the question.
But, Bucher says, the company is more likely to refocus its network infrastructure business than to sell it off to another company. “I’m more aligned with the idea that they just become more selective in the deals they do,” he says.
Meanwhile, everyone's raving about the RAZR. ”If RAZR had been its own brand, it would have been the sixth largest brand in the world,” says Sanford C. Bernstein & Co. Inc. analyst Paul Sagawa. “It would have accounted for 6 percent of all phones sold on the face of the Earth. It’s the biggest hit we’ve seen in the handset world in many years."
Motorola CFO David Devonshire told analysts his company expects sales of between $10.3 billion and $10.5 billion in the second quarter of 2006. He predicted earnings per share for the second quarter of between 30 cents and 32 cents, excluding stock option expense which he expects to be two cents. Analysts expect second-quarter earnings of 31 cents per share on revenues of $10 billion.
— Mark Sullivan, Reporter, Light Reading