Mobile phone maker Motorola, Inc. (MOT) reported Thursday that profit for the second quarter climbed from last year, reflecting strong sales of smartphones.
The company shipped 8.3 million handsets, including 2.7 million smartphones that operate on Google Inc.'s Android software and compete with Apple's system.
Adjusted earnings per share surged and came in below analysts' expectations by a penny, while net sales declined 2%, but topped their estimates. The company also provided earnings forecast for the third quarter, in line with consensus estimate.
In a statement, co-chief executive officer and CEO of Motorola Solutions, reg Brown said, "In the second quarter, our Enterprise Mobility Solutions and Networks businesses continued to deliver best-in-class market leadership and financial returns, with strong operating earnings and excellent cash generation."
The Schaumburg, Illinois-based company reported net earnings of $162 million or $0.07 per share for the second quarter, sharply higher than $26 million or $0.01 per share in the prior-year quarter. Sequentially, net earnings increased from $69 million or $0.03 per share in the first quarter.
The results for the latest quarter and the year-ago quarter include after-tax costs of about $0.02 per share related to stock-based compensation expense, and intangible assets amortization expense.
Excluding special items, adjusted net earnings for the quarter rose to $211 million or $0.09 per share from $79 million or $0.03 per share in the comparable quarter a year ago.
On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.08 per share for the second quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter declined 2% to $5.41 billion from $5.50 billion in the same quarter last year, but topped twenty-six Wall Street analysts' consensus estimate of $5.19 billion. Sequentially, net sales increased from $5.04 billion in the first quarter.
Among Motorola's peers, Finnish mobile giant Nokia Corp. (NOK) reported last week a 22% year-over-year drop in profit for the second quarter, hurt by severe competition in the high-end smartphone market and price pressure as well as lower demand for its mobile devices in North America. Quarterly sales grew 1% to EUR 10 billion or about US$12.8 billion from last year. The world's largest mobile phone maker's total mobile device volumes increased 8% to 111.1 million units from a year ago.
Sony Ericsson Mobile Communications AB, a joint venture between Sony Corp. (SNE) and LM Ericsson Telephone Co. (ERIC), reported earlier in the month a second-quarter profit compared to a loss last year, of EUR 293 million last year, reflecting a 31% increase in average selling prices, which the company attributed to improved product and geographic mix as well as positive currency effects. The company shipped 11.0 million units, down 20% from a year ago.
Motorola's mobile devices sales for the second quarter declined 6% to $1.72 billion from last year, with operating earnings of $87 million, compared to loss of $287 million in the prior-year quarter. The segment shipped 8.3 million handsets, including 2.7 million smartphones.
Home segment sales also dropped 13% year-over-year to $886 million, with operating earnings surging 61% to $29 million from last year.
In the enterprise mobility solutions segment, sales grew 10% from last year to $1.85 billion, with operating earnings growing 28% to $181 million.
Networks sales for the quarter declined 2% year-over-year to $967 million, with operating earnings climbing 93% to $178 million.
Motorola's operating earnings for the second quarter climbed to $363 million from $10 million in the prior-year quarter, with operating margins expanding 650 basis points to 6.7%. Adjusted earnings for the latest quarter was $428 million, up from $179 million last year, with adjusted margins expanding 460 basis points to 7.9%.
Gross margin for the quarter rose to $2.0 billion from $1.71 billion in the year-ago quarter, with gross margin percentage expanding 590 basis points to 37.0%.
Selling, general and administrative expenses rose to $896 million from last year's $822 million, and research and development expenditures were $762 million, down from $775 million in the prior-year quarter.
The latest quarter included $105 million of separation-related transaction costs, and other income of $189 million.
The company ended the second quarter with cash and cash equivalents of $2.89 billion, compared to $2.88 billion at end of the prior-year quarter.
Last week, Nokia Siemens Networks B.V, a joint venture between Nokia and Siemens AG (SI), agreed to acquire the majority of Motorola's wireless network infrastructure assets for $1.2 billion in cash. The companies expect to complete the deal by the end of 2010, subject to customary closing conditions.
The division makes the gear used to operate telecommunications networks, and has been on the block since Motorola decided two years ago to split up the company into two. Motorola is in the process of spinning-off into two separate publicly traded companies, which the company earlier said could close in the first quarter of 2011.
Looking ahead to the third quarter, Motorola expects earnings in a range of $0.10 to $0.12 per share, including the Networks business and excluding stock-based compensation and amortization of intangibles expenses of about $0.04 per share, as well as other associated charges. The Street is currently looking for earnings of $0.10 per share for the quarter.
MOT closed Wednesday's regular trading session at $7.68, down $0.04 on a volume of 34.93 million shares, higher than the three-month average volume of 30.60 million shares. In the past 52-week period, the stock has been trading in a range of $6.04 to $9.45.
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