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10/30/2008
01:13 PM
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Motorola Delays Mobile Spin-Off, Android On Hold

The company has been betting heavily on Google's new Android platform, but now says it won't deliver handset to compete with T-Mobile-HTC's G1 until next year.

The bad news continued at Motorola Thursday as the firm reported that its third quarter losses increased and the spin-off of its faltering mobile devices unit has been postponed.

Nearly all the numbers posted by Motorola were lower than expected, as the company struggles to regain its footing, particularly in its mobile devices unit, which makes cell phones. The firm sold 25.4 million cell phones in the quarter -- down from 28.1 million sold in the second quarter.

The mobile devices unit lost $840 million on revenue of $3.1 billion. Faced with a ferociously competitive handset market and burdened by too many separate handset hardware and operating systems, the cell phone unit has been struggling to downsize and spruce itself up for a spin-off. Other cell phone manufacturers that have looked at the operation have all spurned it.

"While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009, primarily due to the macro-economic environment, stresses in the financial markets and the changes underway in Mobile Devices," said Sanjay Jha, the cell phone operation's new CEO, in a statement. Jha, who is also co-CEO of Motorola, was hired away from Qualcomm last summer to lead the unit as it attempts to regain traction in handsets and to prepare it for spin-out.

The company has been betting heavily on Google's new Android platform, but now says it won't deliver an Android handset to the market until next year. T-Mobile introduced the first Android handset -- manufactured by Taiwan's HTC -- to U.S. markets this month and Motorola isn't expected to have its Android product until 2009.

"We have announced significant actions to accelerate the consolidation of our product platforms and refocus our investment and market priorities," said Jha. "These efforts will result in a leaner organization with a more competitive and cost-effective product portfolio."

Motorola posted better results for its Broadband Mobility Solutions unit, which is led by the unit's CEO Greg Brown. Motorola's Home and Networks Mobility sector reported sales of $2.4 billion, a drop of 1%. Operating earnings increased to $263 million, representing a 65% increase over the third quarter last year. The company said strong demand for HD, HD/DVR and IPTV devices pushed shipments of digital entertainment devices to 4.1 million -- up from 2.7 million last year.

Enterprise Mobility Solutions saw its sales increase 4% to $2 billion and operating earnings in the operation jumped to $403 million for a 23% increase over last year.

Overall, Motorola's sales dropped 15% to $7.48 billion from last year's third quarter while recording a loss of $397 million. In the previous year's quarter, Motorola had earned $60 million. Investment banking analysts had been expecting better numbers.

As for the spin-off of Mobile Devices, Motorola had agreed to the action earlier in the year after activist financier Carl Icahn had pressured the company to agree to break it up.

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