(MOT) Motorola Shows Signs of Revival

October 29th, 2009

Motorola Inc. (MOT) today declared financial results for the third quarter 2009. Quarterly net income from continuing operations was $12 million or 1 cent per share, compared to a net loss of $397 million or 18 cents per share in the prior quarter. Third quarter adjusted (excluding special items) EPS was 2 cents, easily beating the Zacks Consensus Estimate of a break-even quarter.

Improvement in net income was primarily due to the huge reduction in operating expenditure. Quarterly total revenue was $5,453 million, down 27.1% year-over-year and also below the Zacks Consensus Estimates of $5,564 million.

Gross margin in the third quarter was 33.2% compared to 24.1% in the prior-year quarter and 31.1% in the previous quarter. Quarterly operating expenditure was $1.68 billion compared to a massive $2.26 billion in the year-ago quarter.

A huge restructuring initiative taken by the company resulted in an approximate reduction of 8,000 in headcount. Management increased the cost reduction plan by another $100 million. Now the company is expected to save $1.9 billion during 2009 compared to the previous year.

During the quarter, Motorola generated a massive $616 million in cash from operations compared to $180 million in the prior-year quarter and $150 million in the previous quarter. Free cash flow (cash flow from operations less capital expenditure), in the same quarter was $564 million, compared to a mere $24 million in the year-ago quarter and $84 million in the previous quarter.

Cash, cash equivalents and marketable securities at the end of the third quarter was approximately $7.2 billion compared to $6.9 billion at the end of the year-ago quarter and $6.5 billion at the end of the previous quarter. Total debt was around $3.9 billion compared to $4.2 billion at the end of the prior-year quarter and $3.9 billion at the end of the previous quarter.

Mobile Devices Division

Quarterly revenue was $1.7 billion, down 46% year-over-year. Operating loss was $183 million, a significant reduction from an operating loss of $840 million in the year-ago quarter and a loss of $235 million in the previous quarter. During the reported quarter, Motorola shipped 13.6 million of mobile phones.

Home and Network Mobility Division

Quarterly revenue was $2 billion, down 15% year-over-year. Operating income was $199 million compared to an operating income of $263 million in the year-ago quarter. During the third quarter, Motorola conducted the world’s first live 2.6GHz TD-LTE mobile demonstration for China Mobile Ltd. (CHL) and shipped 3.3 million digital entertainment devices.

Enterprise Mobility Solutions Division

Quarterly revenue was $1.77 billion, down 13% year-over-year. Operating income was $306 million compared to an operating income of $403 million in the year-ago quarter. During the third quarter, Motorola introduced its rugged mobile computer MC9500. The company will also provide 3.5G WAN with support for GSM-HSDPA and EVDO Rev A wireless broadband connectivity.

Future Financial Outlook

Management provided guidance that the company’s GAAP EPS from continuing operations is expected to be in the range of 7 cents to 9 cents in the fourth quarter 2009, well above the Zacks Consensus Estimate of an EPS of 6 cents.

Zacks Investment Research
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(MOT) Motorola Shows Signs of Revival

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