Motorola Says Profit Slumps 84%; Forecasts Loss

Motorola Says Profit Slumps 84%; Forecasts Loss

Jan. 23 (Bloomberg) -- Motorola Inc., the biggest U.S. mobile-phone maker, posted an 84 percent drop in fourth-quarter profit and forecast an unexpected loss for this period after customers fled to Apple Inc. and Samsung Electronics Co.

Net income fell to $100 million, or 4 cents a share, from $623 million, or 25 cents, a year earlier, the company said in a statement today. Sales declined 18 percent to $9.65 billion.

Phone shipments plunged 38 percent as devices including the Razr 2, the follow-up to Motorola's best-selling model, failed to keep consumers away from Apple's iPhone and Samsung's Sync camera handset. The slump will force Chief Executive Officer Greg Brown, who took over Jan. 1, to further broaden his lineup of video and music phones, according to Morgan Keegan & Co.'s Tavis McCourt.

``The look and feel of their phones is getting old,'' said the Nashville, Tennessee-based analyst, who advises investors to hang on to the stock. ``People want touch screens and full keyboards, and Motorola's challenge over the next year or two is to really reinvent their product lineup.''

Excluding costs for job cuts and other items, the first- quarter loss will be 5 cents to 7 cents a share, Motorola said. Analysts on average projected a profit of 10 cents.

Motorola fell 32 cents, or 2.6 percent, to $12 in trading before exchanges opened. Before today, Motorola shares had lost 34 percent of their value in the past year. They closed at $12.32 in New York Stock Exchange composite trading yesterday.

Zander's Legacy

Excluding costs for job cuts, fourth-quarter profit was 14 cents a share, topping the 13-cent average projection of analysts. On Oct. 25, Schaumburg, Illinois-based Motorola had predicted profit of 12 cents to 14 cents. Sales met the $9.64 billion average of estimates compiled by Bloomberg.

Brown became chief after predecessor Ed Zander resigned in November. Zander had revived Motorola with the Razr, only to see its cachet fade amid gains by Nokia Oyj. Other gainers include Samsung, which supplanted Motorola last year as the world's second-biggest maker of mobile phones.

Now Sony Ericsson Mobile Communications Ltd., the fourth- largest handset maker, is threatening Motorola's third-place spot. The company posted an 18 percent increase in unit shipments last quarter and may overtake Motorola this year, according to a report from Cowen & Co. analyst Matthew Hoffman in Boston.

Motorola's share of global phone sales fell to 13.1 percent in the third quarter from 20.7 percent a year earlier, according to Stamford, Connecticut-based researcher Gartner Inc. The company probably lost more share last quarter, McCourt said.

Nokia increased its market share to 38.1 percent in the third quarter, while Samsung boosted its share to 14.5 percent, according to Gartner. Sony Ericsson lifted its share to 8.8 percent.

Brown's Strategy

To prevent Motorola from slipping further, Brown, 47, plans to start selling the Moto Z10 for shooting and editing video and the Rokr E8, which holds about 5,000 songs and includes a camera. He also may benefit from the 7,500 job cuts Zander started last year. The lower costs helped Motorola post its first profit in three quarters in October.

``They've done a lot of cost-cutting,'' McCourt said. ``The big challenge for Brown is to stabilize revenues and ultimately start growing them again.''

BLOOMBERG