UPDATE: Motorola 2Q Profit Up On Enterprise, Network Strength

29th Jul 2010 14:36

(Updates with executive and analyst comments, adds background.) By Roger Cheng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Motorola Inc. (MOT) reported a six-fold increase in second-quarter profit, largely driven by its lower profile non-cellphone units, as the company took several key steps toward its planned split early next year. The Schaumburg, Ill., company's mobile devices business moved back into the black thanks to a legal settlement. The unit benefited from the continued strength of the Droid smartphone, sold exclusively through Verizon Wireless. The follow-up device, Droid X, launched in July and was well received. A return to profitability is crucial for the business to survive as a separate entity. Like the last several quarters, the bulk of the profit came from Motorola's corporate mobile computing business, as well as its networks equipment unit, which the company said last week it would sell to Nokia Siemens for $1.2 billion, accelerating the break-up of the company. In total, Motorola posted earnings of $162 million, or 7 cents a share, up from a year-earlier profit of $26 million, or a penny a share. Excluding one-time items such as the legal settlement and separation-related costs, the company earned 9 cents a share. Sales fell slightly to $5.41 billion. Analysts, on average, forecast earnings of 8 cents a share on sales of $5.2 billion, according to Thomson Reuters. Motorola plans to split the company in the first quarter. Earlier this month, it filed to formally separate the companies into units, which would share the Motorola name. Co-Chief Executive Sanjay Jha will run the mobile devices and home divisions, while Co-CEO Greg Brown will run the enterprise mobility division. The mobile devices business saw sales fall 6% to $1.7 billion as it continues its transformation from a handset maker in every category to one focused primarily on the smartphone segment. Jha has bet heavily that the company's line of smartphones running on Google Inc.'s (GOOG) Android software will lift results. The original Droid likely benefited from continued shortages of the Droid Incredible, which was Verizon Wireless's flagship device for the period. Promotions that would have featured the Incredible instead highlighted the Motorola smartphone. The Droid Incredible, made by HTC Corp. (2498.TW), is still under backorder until August. Jha, however, downplayed the issue. "I don't think the shortage of Incredibles had as much impact as you may think," he said. The Droid X has been positioned as Verizon Wireless's next flagship phone, yet it too has been backordered until next month on similar constraints with components. "[Droid X is] off to a great start and exceeding our expectations," Jha told analysts on Thursday. "Demand is outstripping supply." The device has also been drawn into a war of words with Apple Inc. (AAPL), with Apple claiming the Droid X has the same antenna issues as its iPhone 4. Motorola has hit back with promotions of its own, claiming customers can hold the Droid X any way they want, and that there's "no jacket required," a shot at the free covers Apple is sending to all iPhone 4 customers. Motorola shipped 2.7 million smartphones in the quarter, and Jha maintained the company's estimate for 12 million to 14 million smartphones shipped for the year. He expects a return to sales growth for the division in the third quarter, the first time in nearly four years, with profitability in the fourth quarter. Jha's other unit, the home division, saw sales fall 13% to $886 million. Co-CEO Greg Brown's two divisions, meanwhile contributed strongly to earnings. Sales at Motorola's business mobility unit rose 10% to $1.9 billion after winning several key contracts in the period. The network equipment business, which will be sold off to Nokia Siemens by the end of the year, saw revenue fall 2% to $967 million. Motorola said it expects third-quarter earnings of 10 cents to 12 cents a share. Wall Street is looking for earnings of 10 cents a share. Motorola shares rose 2% to $7.84 in recent premarket trading. -By Roger Cheng, Dow Jones Newswires; 212-416-2153; [email protected] (END) Dow Jones Newswires July 29, 2010 09:36 ET (13:36 GMT)