Motorola shares bounce back with high hopes for its smartphones

Motorola Inc. posted a better-than expected Q1 earnings Thursday. (Photo/AP)

Motorola Inc. stock (NYSE: MOT) bounced back 3.47 percent Thursday after its first quarter earnings signaled rising potential in its Android-based smartphone sales.

The Schaumberg, Ill.-based company reported its first-quarter earnings of $69 million, or 3 cents per share, in the quarter ended April 3, 2010, compared with a loss of $231 million, or 13 cents per share, in the year-prior period. The company’s quarterly sales fell 6 percent to $5.04 billion from the previous quarter’s $5.37 billion.

“It was a good quarter,” said Matthew Thorton, an analyst with Avian Securities LLC. The company managed well with its guidance at a time when analysts tend to give a cautious outlook on the market.

Its second-quarter guidance for earnings is 7 cents to 9 cents per share. According to Zachs Investment Research Inc., Motorola can expect earnings of 5 cents per share in the second quarter of 2010.

Motorola’s strategy is “absolutely” on its mobile devices, Thornton explained. At the beginning of this year, Motorola introduced two smartphones, Cliq and Droid, which operate on the latest Google’s Android 2.1 system. The company’s reported $1.6 billion in mobile device sales and $8.5 million from the shipment of handsets, including 2.3 million smartphones. Last year, the company shipped $14.5 million devices in the same period.

“We are in a strong position to improve our share in the rapidly growing smartphone market,” said Sanjay Jha, Motorola’s co-CEO. Jha will become a CEO of the mobile devices and home sector when the company splits its business into two public companies in early 2011. About 40 percent of the demand in smartphones came from Europe and China, Motorola’s second largest market after the U.S.

And it’s not just Motorola who’s investing in growing smartphone markets. Verizon Wireless started selling the Droid Incredible Thursday. It’s a device by HTC Corp. that runs on Google Inc.’s Android 2.1 software. Hewlett-Packard Co. (NYSE: HPQ) just bought Palm Inc. (NasdaqGS: PALM), the maker of Palm Pre and Pixi smartphones, in a $1.2 billion deal. And the dominant player, Apple Inc. (NYSE: AAPL), is about to release its revamped iPhone in June.

Besides the high competition in the market, Motorola faces a challenge with its operating loss in mobile devices. The company reported an operating loss of $192 million this quarter and $545 million in the year-ago quarter. Due to the lingering losses, the company expects sales growth to take effect by the fourth quarter, said Jha during Thursday’s earnings call.

Motorola’s shares closed at $7.16, up from $6.92 on Wednesday.

Leave a Reply