Motorola Swings To Loss On Weak Handset Operations

Motorola , the world's second-biggest mobile phone maker, posted a first-quarter loss on weak handset sales and gave new forecasts that raised fresh questions about when the company would become profitable again.

While Motorola shares were trading higher Wednesday, analysts were disappointed with Motorola's view on second-quarter earnings despite company assurances it would post a profit for the full year.

Besides challenges such as stiff competition in emerging markets and criticism for a stale phone line-up, Motorola also faces a proxy battle with activist investor Carl Icahn, who has a 2.9% stake in the company and is seeking a board seat.

"Profitability in phones wasn't quite as bad as expected but there's not a recovery in sight," said Charter Equity Analyst Ed Snyder. "Next quarter is quite a bit of a disappointment against consensus. Wall Street was expecting them to see some recovery next quarter."

Motorola reported a net loss of $181 million, or 8 cents a share, compared with earnings of $686 million, or 27 cents a share, a year ago.

The company lost 9 cents a share from continuing operations, and excluding 11 cents a share in one-time charges, posted a quarterly profit of 2 cents a share.

Analysts surveyed by Thomson Financial predicted earnings of 2 cents a share on revenues of $9.29 billion.

Revenue fell nearly 2% to $9.43 billion from $9.61 billion.

Motorola stunned investors in March, saying that it would likely lose money in the first quarter and that revenues would be about $1 billion lower than anticipated as mobile phone sales volumes and prices declined. .

"As I said a few weeks ago, the performance in our Mobile Devices business in the first quarter is unacceptable and we are committed to restoring it to an appropriate level of profitability," Motorola CEO Ed Zander said in a statement.

Motorola forecast a second-quarter profit of 2 cents to 3 cents a share, excluding reorganization charges and other items, with sales "essentially flat" with the first quarter.

Motorola repeated its expectation that it would be profitable for the full year as it sees sales and operating margins gradually improving in the second half. But analysts said it would be tough for them to recover.

The company shipped 45.4 million handsets in the quarter, down from 65.7 million in the fourth quarter. Revenue for its mobile devices business was down 15% from the year-ago quarter at $5.4 billion and the unit posted an operating loss of $231 million, compared with a profit of $701 million in the year-ago quarter.