Shares in Motorola Inc slipped 5.82% to $17.65 while those of Nokia Corp rose 3.89% to 17.37 euros ($23.10) in Helsinki as investors concluded the disastrous recent performance of Motorola was the result of growing problems in its handset business from which Nokia can only benefit.
Motorola has trimmed back its first-quarter revenue forecast to $9.2bn to $9.3bn, more than $1bn below the $10.4bn to $10.6bn it forecast in January.
A collapse in sales at its handset business is entirely responsible. Nothing is going right for the unit and Motorola reported that it had suffered lower overall unit volumes, a difficult pricing environment, particularly for low-tier products, and a limited 3G product portfolio. It said it is expecting to report an operating loss for the first quarter.
While most observers regarded a $2bn share repurchase plan as a sop to shareholder activist Carl Icahn, who is pressing for a seat on the board, the worry is how the company will turn around its mobile devices business whose performance CEO Ed Zander conceded was unacceptable.
But Zander said he sees no quick fix, and that after a further review, he recognizes that returning the business to acceptable performance will take more time and greater effort.
Even with a tired product range following the success of the Razr, it has grown market share but at the expense of profits. For a company that prides itself on its technical expertise, Motorola has suffered from the vast growth of low-cost phones for developing countries where Nokia has been able to make money with a far lower component count in each handset than Motorola has been able to achieve.
With the appointment of Greg Brown as COO and the retirement of David Devonshire as CFO, Motorola will be able to claim that it strengthened management. However, it has forecast that full-year revenue will be substantially below earlier guidance of an 8% to 10% rise to a range of $46bn to $49bn.