Optical/IP Networks

Moto Phones in a Profit

Motorola Inc. (NYSE: MOT) -- the world's second largest mobile phone maker -- today reported second-quarter profits of $933 million largely driven by sales of its latest handsets.

For the second quarter of 2005 the firm reported revenue up by 17 percent at $8.83 billion, compared to $7.54 billion in the same quarter a year ago.

Motorola says that its outlook for the third quarter of 2005 is for sales in the range of $8.9 billion and $9.1 billion. The company predicts its earnings per share from continuing operations in the third quarter of 2005 will be in the range of 27 cents to 29 cents a share.

Handset sales were the main driver of Moto's increased profitability. The firm's mobile devices segment sales were $4.9 billion, representing more than half of its total sales for the quarter, and up 24 percent compared with a year ago. Motorola says it shipped a record 33.9 million handsets in this quarter, giving it an 18.1 percent share of the market behind Nokia Corp. (NYSE: NOK).

The firm's flagship handset product is the extra-skinny RAZR (a.k.a. "razor") phone. The firm shipped more than 5 million of these this quarter. "We continue to grow market share profitably, which is very important," says Motorola CEO Ed Zander.

And it seems that the company is gearing up to launch more product. "I look forward to having a third and fourth quarter where we have several iconic products to sell," Ron Garriques, Motorola EVP and president of the company's mobile devices unit, said on the firm's earnings conference call .

"Sliver, Pebble, Rocker [SLVR, PEBL, RCKR in Moto-speak]," he intoned on the call [ed note: Rock, scissors, paper?]. The Rocker is likely the fabled iPod phone (see CTIA: Wireless Bytes).

In comparison, Motorola's networking business saw a more modest bump. Sales were $1.6 billion, up 3 percent from the year-ago quarter and up 9 percent for the first half of 2005.

Executive VP and president of Motorola's networks business, Adrian Nemcek, said that its GSM business has seen "continous growth" notably in "emerging markets", while CDMA saw "a slight decline from last year" but "remains strong."

Nemceck also predicted that the next couple of quarters would be strong for its iDEN business. IDEN is the proprietary Motorola networking equipment used by Nextel Communications Inc. (Nasdaq: NXTL) for its nationwide network in the U.S. Following the completion of its merger with Spirit Corp., Nextel is eventually expected to move to CDMA cellular technology, but the company has said it expects to operate some form of iDEN network for the next few years at least.

Zander also noted that the company is pushing into new network technology areas such as WiMax and IMS (a.k.a fixed/mobile convergence). (See Sprint Picks Moto for WiMax.)

The firm's government and enterprise mobility solutions unit saw sales of $1.7 billion, up 7 percent compared with the 2004 quarter. Motorola has started to add wireless LAN mesh products to this segment recently and says it has added 30 new customers using this technology in the second quarter (see Gorillas in the Mesh).

The firm's connected home solutions group -- which ships set-top boxes and broadband modems -- reported sales of $718 million, up 35 percent from a year ago.

Motorola says it now has $7 billion in cash to play with, having added a billion more over the course of the quarter (see Moto's in a Buying Mood).

— Dan Jones, Site Editor, Unstrung

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