Moto Still Losing Mojo

Sharply declining handset sales at Motorola overshadow successes in the enterprise mobility unit, where the Symbol acquisition is paying off.

Another sharp decline in mobile handset sales resulted in an 84 percent decline in fourth quarter net income for Motorola. And that wasn't even the bad news.

In a Jan. 23 conference call, new Motorola CEO Greg Brown warned, "Our recovery in mobile devices will take longer than expected." He predicted further declines in handset sales and market share in the first quarter.

The nation's No. 3 cell-phone maker reported it shipped 40.9 million handset units in the fourth quarter, a dramatic drop from the 65.7 million units shipped a year ago. Motorola's Mobile Devices segment sales were $4.8 billion, down 38 percent compared with the year-ago quarter.

The operating loss was $388 million, compared with operating earnings of $341 million in the year-ago quarter. For 2007, sales were $19 billion, a 33 percent decrease compared to 2006. The Mobile Devices unit also incurred an operating loss of $1.2 billion, compared to operating earnings of $2.7 billion in 2006.

Overall for 2007, Motorola suffered a net loss of $49 million, or 2 cents per share. A year ago Motorola posted a profit of $3.67 billion. Revenue declined 15 percent to $36.6 billion from $42.8 billion.

"We recognize there is a lot more work to be done," Brown said. "Demand for some of our products has slowed in an increasingly competitive market."

Motorola's mobile devices division represents about half of Motorola's sales. After introducing the successful RAZR model in 2004, Motorola has struggled to introduce another hit cell phone. Motorola fell from No. 2 to No. 3 among the dominant handset makers. Nokia and Samsung are now the top two handset manufacturers.

The failure of Motorola to follow up the RAZR with another hit led the company's board to oust former CEO Ed Zanders in November. Brown officially took over as CEO Jan. 1.

"We are focused on aggressively rationalizing the company's cost structure and working to get Mobile Devices back on track," Brown said.

The bad news on Motorola's continuing handset sales slump overshadowed better news from the company's other two major divisions, the home and networking segment and the enterprise mobility unit.

Featuring television set-top boxes and modems, the home and networking unit increased sales by 11 percent to $2.7 billion. Operating earnings, though, fell 14 percent to $192 million.

The enterprise mobility solutions division saw a 40 percent increase in operating earnings of $451 million on sales of $2.1 billion, largely on the strength of acquiring Symbol Technologies in 2007.

"The integration of Symbol is essentially complete," Brown said.