Lower Handset Sales Hit Motorola's Second-Quarter Earnings

Motorola reported its second-quarter financial results Thursday and, as promised, they were grim as the company's unsuccessful attempts to find market-share winning handsets continued. Sales from Motorola's mobile devices unit plunged 40%, causing analysts to predict the company will lose market share in the area.

The firm has been searching for a way to return to its past glory days when it dominated handset sales and produced ever-growing sales and profits. For a brief period a few months ago, Motorola enjoyed an upward surge when its Razr handset was a hot-selling item, but its success was short-lived.

"This was a challenging quarter for Motorola in which revenue fell short of our expectations due to a decline in mobile device unit shipments," said Ed Zander, Motorola's chairman and CEO, in a statement. "However, I am pleased with the solid results within our Home and Networks Mobility and Enterprise Mobility Solutions businesses."

The Home and Networks Mobility unit recorded sales of $2.6 billion, up 9% over the previous year's figures. The Enterprise Mobility Solutions unit logged sales of $1.9 billion, a 42% increase that reflected strong results from the Symbol business that Motorola acquired in January.

Motorola's second-quarter revenue dropped to $8.7 billion from $10.8 billion in the previous year. The firm lost $28 million.

With no salvation products on the horizon in the short term, stock analysts covering Motorola were predicting it would take the company years to turn around. "We remain on the sidelines as Motorola's issues are likely to extend into 2008," stated Philip Cusick, a Bear Stearns analyst, in a note.

Nokia, in particular, has targeted Motorola with a series of new handsets. Nokia has said it believes it will take market share in coming months from Motorola. Moreover, all of the established traditional handset makers have felt heat from Apple's new iPhone, which was introduced last month amid generally glowing reviews.

"I think we're doing the right things," Zander said in a conference call. "The management team is working real hard. We have to start demonstrating that we're making progress." The second-quarter numbers were in line with Motorola's predictions last week.