Motorola Inc. saw its second-quarter profit jump significantly from last year, with executives sounding increasingly confident about the mobile device devision’s ongoing transformation into a profitable smartphone maker.
The Schaumburg-based company posted net profit of $162 million, or 7 cents per share, for the second quarter, compared with a year-earlier profit of $26 million, or 1 cent per share. The profits were driven mostly by Motorola’s enterprise mobility and networks units, although its mobile phone business showed signs of progress.
Motorola is planning to split into two entities in the first quarter of 2011, with one company making communications gear and mobile computing products for government and business customers. The other company will focus on mobile devices and cable television set-top boxes. Last week, Motorola announced it was selling its networks business to Nokia Siemens Networks for $1.2 billion in cash. That deal is expected to close by the end of the year, meaning Motorola will exit the wireless networks infrastructure business before it splits.
The mobile devices unit posted sales of $1.7 billion, a 6 percent decrease from the second quarter of 2009. Its operating earnings were $87 million, turning around a loss of $287 million a year earlier, but the profit number was boosted by a $228 million legal settlement. Co-Chief Executive Sanjay Jha said he is still aiming to restore the mobile devices business to profitability in the fourth quarter.
The phone unit shipped 8.3 million handsets during the second quarter, 2.7 million of which were smartphones. Motorola launched the Droid X, a follow-up to last year’s Droid phone, at Verizon Wireless earlier this month. Sales have exceeded expectations and their impact will be seen in the third-quarter results, Jha said.
Jha stuck with his previously stated projection of shipping between 12 million and 14 million smartphones this year, though he said he’s “more certain about our execution” than he was at the beginning of the year. Motorola will “deliver meaningfully more than 20 (smartphones)” this year, Jha said.
Jha did point out some challenges, including supply constraints in semiconductors that are affecting multiple smartphone makers, as well as a highly competitive holiday selling season. Both Microsoft and BlackBerry maker Research In Motion are expected to have new offerings in time for the crucial fourth quarter.
Even so, “I think we’ll have meaningful products in the marketplace — we’re well-placed with multiple carriers,” Jha said.
The Home business, which Jha also oversees, saw second-quarter sales fall 13 percent from a year earlier, though profit rose to $29 million from $18 million.
Co-Chief Executive Greg Brown’s enterprise mobility unit was a strong performer, with sales jumping 10 percent to $1.9 billion. Profit climbed to $181 million from $141 million in the year-earlier quarter. Brown said businesses are starting to spend on technology again, including on emerging technology like radio-frequency ID tags. Motorola is supplying the RFID technology for Wal-Mart in the U.S., with the retailer installing these electronic sensor tags on individual pairs of jeans to track inventory.
RFID technology was “overhyped” several years ago, but is now “beginning to be more front and center,” Brown said.
Motorola’s networks business saw sales slip 2 percent to $967 million in the second quarter. Earnings rose to $178 million from $92 million in the second quarter of 2009.
