Motorola Swings To 4Q Loss, Suspends Dividend

Posted by Kris | Tuesday, February 03, 2009 | | 0 comments »

The writing on the wall for MOTOROLA. This is one of the signs that i am looking for. The suspension of dividends by Wall Street. This shows the diminishing growth and earning expectation in line with a severe recession.More to come as dividend suspension is still new to Wall Street. 

NEW YORK -(Dow Jones)- Motorola Inc. (MOT) swung to a fourth-quarter loss and suspended its dividend as the weakening handset business continues to squeeze the embattled telecommunications equipment maker.

The Schaumburg, Ill., company has aggressively cut costs in a bid to survive the downturn, enacting such moves as the dividend cut and taking "aggressive measures" in areas such as Mobile Devices. Last month, it said it would cut 4, 000 jobs, or about 6% of its work force. That comes on to of 3,000 cuts announced in the fall.

Motorola is finding it increasingly difficult to sell its handsets, partly because of the lack of interest and a weak lineup, but also because the overall cellphone market is slowing. The drastic cuts put into question the company's ability to turn itself around.

"They better hurry and fix mobile devices or it will become irrelevant," said RBC Capital Markets analystMark Sue.

Motorola posted a loss of $3.58 billion, or $1.57, compared with a year earlier profit of $100 million, or 4 cents a share. Results were hurt by several one-time items, including an allowance for deferred tax valuation, expenses related to layoffs and goodwill charges, which amount to $1.56.

Revenue fell 26% to $7.14 billion from $9.64, with results propped up by its Enterprise Mobility segment.

Wall Street, on average, forecast break-even bottom line results, and revenue of $7.15 billion.

Motorola shares recently fell 12% to $4 in pre-market action.

Motorola has dramatically cut costs in the Mobile Devices unit, choosing to focus on a handful of products including high-end smartphones that use more sophisticated software such as Microsoft Corp. (MSFT) orGoogle Inc.'s (GOOG) Android software.

For 2009, Co-Chief Executive Sanjay Jha said Tuesday the company will focus on fewer phones with a better mix. He expects handsets sales decline to fall faster than the broader market because of a smaller contribution from low-end phones.

"We're much more focused on the mid to high tiers," Jha told analysts.

Motorola will develop more Android phones this year, and focus on Windows Mobile in 2010, which marks a blow to Microsoft.

The industry is suffering from a global slowdown. The total number of handsets that shipped in the fourth quarter fell more than 10% to 295 million units, according to Strategy Analytics. The company expects 2009 global sales will fall 9% in the weakest year since the modern cellphone industry began.

Motorola, in particular, is seen as vulnerable because it's losing market share faster than its peers. Its most successful phone, the Razr, is the free handset new customers get after signing a two-year contract. The company said its market share had fallen to 6.5%, nearly half the position it held a year ago, and the smallest among the top five players.

Looking ahead, the company expects first quarter loss excluding one-time items of 10 cents to 12 cents a share.

Analysts, on average, projected a loss of 6 cents a share.

In addition to saying most employees won't get pay raises this year, Motorola has frozen its U.S. pension plan, and temporarily suspended matching contributions to its 401(k) plan as part of its cost-cutting program.

Last month, the company said its loss from continuing operations, excluding items, would be 1 cent to 2 cents a share on revenue of $7 billion to $7.2 billion. The numbers were below analysts' then-estimates.

Gross margins rose to 29.7% from 26.3% amid the cost-cutting.

Motorola shipped 19.2 million handset units in the quarter, down 53%, as it continues to fall from its one-time perch as the industry's leader. The mobile- device division posted a wider loss as sales slumped 51%.

Revenue from the home-networks segment fell 4.7% as earnings rose 34%. The enterprise business, recently divided from home networks, posted a 3.6% rise in revenue as earnings increased 3.3%.

Anime Pic: Eye Shield