Motorola expects its troubled mobile device unit to recover in the second quarter and be profitable for the year as a whole after acknowledging that its obsession with market share has led the business into deep losses.
CEO Ed Zander admitted that this was a big error in judgment. I love market share but you’ve got to make money, he said as the company reported first-quarter figures.
It reported a net loss of $181m for the first quarter to March 31, down from income of $686m on revenue 1.8% lower at $9.43bn. Nor is there likely to be a swift turnaround. While the loss at the handset unit is likely to be down, Motorola forecasts that the second-quarter outlook for sales is essentially flat, whereas last year it showed a 29.4% sequential rise. It expects to record earnings per share before exceptional items in the second quarter in the range of $.02 to $.03.
With activist investor Carl Icahn, who holds a 2.9% stake, bitterly critical of the company’s performance, Zander knows he has little time to turn around the performance of mobile devices segment. Its performance was abysmal in the quarter with sales down 15% at $5.4bn, and it turned an operating profit of $701m a year earlier an operating loss of $231m, compared with operating earnings of $701m.
Unit volumes were down to 45.4 million handsets and the company suffered in the developing markets and Europe. While last year it said it was hot on Nokia’s heels with a market share of over 20%, it now says its share of the global handset market for the quarter was estimated at 17.5%.
It repeated its aim of standardizing on three software platforms: AJAR at the low-end, Linux/Java for the mid-range, and Windows at the high end. Phasing out legacy platforms will help it gain the competitive advantages of using alternate source silicon providers.
Networks and enterprise segment sales rose 20% to $3.bn though margins were under pressure as operating earnings rose just 4.6% to $343m. The unit was helped by the inclusion of figures from Symbol Technologies acquisition. The best figures came from the connected home solutions segment where sales rose 42% to $1bn and operating earnings rose 140% to $113m.