Motorola Sees Income, Sales Drop

Motorola posted another disappointing quarter Oct. 25 but gave investors some hope that a series of job cuts and a new line of handheld devices may revive the troubled U.S. mobile giant.

Third-quarter net income fell to $60 million from $968 million a year earlier. The Schaumburg, Ill.-based company posted sales of $8.81 billion, also down from 2007 third-quarter sales of $10.6 billion. For the first nine months of 2007, Motorola recorded a $149 million loss on sales down 13 percent at $30 billion.

Last month, Motorola officials said they expected to start turning things around by the end of the year with the introduction of new smart phones for both the enterprise and consumers. During the third quarter, Motorola increased cell phone and other handheld devices—including a new deluxe Razr2—shipped from 35.5 million in the second quarter to 37.2 million.

However, most of the new Motorola phones are less expensive than competing devices and have thin profit margins. For the quarter, Motorolas mobile device unit posted a 36 percent decline in revenue to $4.45 billion. The division lost $248 million after earning $843 million in the same period last year.

In the second quarter, declining sales dropped Motorola into third place among handset makers behind market leaders Nokia and Samsung.

"The third quarter was about progress," Motorola Chairman Ed Zander said in a conference call. "We also recognize theres a lot of work to do."

Zander offered a promising look for the fourth quarter, estimating profits of 12 to 14 cents a share. Most Wall Street analysts are predicting an adjusted profit of 13 cents a share. Motorola shares have climbed 18 percent over the last two months, from a two-year low of $16 in August to $18.90 Oct. 24.

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Zander and his executive team have been under increasing pressure to improve Motorolas bottom-line performance, with top investor Carl Icahn threatening to mount a campaign to overthrow Zander if performance doesnt improve.

Zanders new reorganization now places its mobile devices into four categories: mass market, feature units like the Razr, multimedia devices and enterprise-class devices featuring the Q line of smart phones.

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