Moto's Handy Quarter

Motorola Inc. (NYSE: MOT) busted analyst predictions for its second-quarter handset sales with 51.9 million units shipped, compared to the consensus estimate of 48.3 million. The breakthrough gives Motorola its biggest chunk of the handset market in years with 22 percent of the cellphone pie.

Motorola says that its results are down to the continued strong performance of its RAZR model -- just as it has been for several quarters now -- and good 3G performance. (See Moto Phones in a Profit.)

Motorola's revenue for the quarter was $10.88 billion, up 29 percent over the same period last year, and beating analyst expectations of $10.1 billion. For the third quarter, Motorola says it expects sales between $10.9 billion and $11.1 billion.

Analyst Richard Windsor at Nomura Securities notes, however, that Motorola is not taking share from major rival Nokia Corp. (NYSE: NOK) so much as smaller players in the market. "Some of this share has come from Samsung and LG Electronics both of whom have had a difficult second quarter as well as a continued market share loss by smaller players," he writes.

Nokia, which reported its second-quarter results this morning, saw revenue rise 43 percent for its second quarter -- growth that was largely spurred by sales in India and China and other Asian markets.

Prudential Equity Group LLC analyst Inder Singh noted that Motorola also saw sales from Asia: "Growth was strongest in Asia, India, and North America, while Europe saw slower growth."

Motorola also managed to largely maintain average selling price (ASP) on its phones, a metric closely watched by industry commentators. "ASPs declined just 1 percent, less than expected, though we expect steeper declines going forward," says Singh in a research note.

The company is continuing to build a war chest of cash for a potential acquisition. Motorola made $500 million from operations during the quarter, meaning it now has over $10 billion in net cash it could spend, according to Merrill Lynch & Co. Inc.

"We continue to believe the company will look to make selective acquisitions focused on key product areas to round out its video and access businesses," comments Prudential's Singh.

— Dan Jones, Site Editor, Unstrung

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