Motorola’s shares reacted to a loss-making second quarter by rising 1.44% to $18.26 as reports began to circulate that the board had begun a search for a candidate to replace CEO Ed Zander.
Zander’s credibility has been badly dented after Motorola plunged into a $28m second-quarter loss, down from income of $1.38bn as huge problems at its mobile handset division led to a 19.3% fall in revenue to $8.7bn.
The company lost its number-two position in the handset market to rival Samsung as problems with high-end models in western markets combined with bruising competition in developing markets left its largest business unit in disarray.
The best Motorola could offer is that while it does not expect the mobile devices business to be profitable for the full year, it does expect its financial results to improve in the second half.
A breakdown of the figures showed that revenue at the mobile device unit fell 40% in the quarter to $4.2bn, a catastrophe for a company that forecast in April that the business would show a recovery. In 2006, Motorola said it had driven its market share up to 23.3%, but now it is forecasting that its share for 2007 will be 13.3%.
The mobile device business made an operating loss for the quarter of $264m, compared to operating earnings a year ago of $804m. It said lower sales and earnings were attributable to lower overall unit volumes, particularly in Asia and the EMEA region.
Zander said that although Motorola is doing the right things, make no mistake about it, there is still a lot more to do.
In the home and networks mobility and enterprise mobility solutions businesses, operating income fell 14.6% to $191m on revenue up 9% at $2.5bn, while enterprise mobility increased operating income by 26.8% to $303m on revenue up 42% at $1.9bn.
When Zander took over as CEO in 2003 after a successful career at Sun Microsystems, he said: We’ve got to get execution, we’ve got to get results, we’ve got to get predictability. He has failed in all three. It is difficult to think of such a sudden implosion in business as has occurred at its handset business. A new CEO is urgently needed to sort out a failing business.