Motorola's Mixed Bag

Motorola Inc. (NYSE: MOT) saw revenues up 17 percent for the third quarter of 2006 but net earnings fell 45 percent even as the firm grew its share of the cellphone market to 22.4 percent.

The networking giant reported third quarter 2006 overall revenues of $10.6 billion, marginally missing its own guidance of $10.9 billion to $11.1 billion. Wall Street had been expecting $11.07 billion.

Motorola's quarterly net earnings were $968 million or $0.39 per share, compared to $1.75 billion or $0.69 a share a year ago. The company's shares lost nearly 5 percent in Wednesday trading on the news.

"Motorola gets about a third of its revenue from other things besides phones and it was these things that were mostly responsible for the shortfall," notes Gartner Inc. Todd Kort.

Mobile Devices Segment sales were $7.03 billion, up 26 percent compared with the year-ago quarter. The handset division grew the firm's device market share with shipments of 53.7 milion handsets in the quarter. Motorola estimates its global handset market share is now 22.4 percent, up 3.8 percentage points versus the same quarter a year ago. Nokia Corp. (NYSE: NOK) is the No. 1 handset maker in the world.

"Motorola has been relatively weak in 3G and dual-mode phones -- compared with Nokia & Sony Ericsson -- and their iDEN phone shipments declined," says Kort. "Device sales in India doubled [year-on-year], but other regions were essentially flat."

"The company appears to have gained market share, although their shipments of 53.7 million were below estimates of 54.8 million," notes Prudential Securities analyst Inder Singh. "Average Selling Prices [ASPs] of $131 were also lower than the consensus estimate of $135, which resulted in a weaker than expected showing for the handset division."

Motorola has consistently managed to grow its device share over the last several quarters because of the popularity of the RAZR phone.(See Moto's Handy Quarter.) "RAZR is still doing well in shipments, but ASPs are declining due to competitive pressures and some repositioning to make room for new models such as KRZR, RIZR and maxx," says Gartner's Kort.

Kort also says that some of the firm's newest smartphones aren't doing as well as expected. "[The company] avoided talking about the Motorola Q, which is selling in volumes well below the level of Motorola’s May forecast," Kort says.

— Dan Jones, Site Editor, Unstrung

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