Motorola Backs Fourth-Quarter Forecast

Mobile phone makerMotorolabacked its forecast for fourth-quarter earnings and revenue growth Thursday, sending its shares up as much as 3.5 percent.

Motorola's Razr V3 cell phone.
Motorola's Razr V3 cell phone.

The news was a relief for some investors who had worried that last week's announcement that Chief Executive Ed Zander was stepping down was a sign that Motorola would miss its targets.

"What we failed to take into account, frankly, is that you would have great angst over the fact we made that announcement, and didn't confirm" fourth quarter guidance at the same time, Chief Financial Officer Tom Meredith told a Lehman Brothers investor conference.

He backed Motorola's forecast for earnings from continuing operations of 12 cents to 14 cents per share, and said its mobile device unit would see sequential revenue and bottom-line improvements.

Its mobile phone business has been losing market share to rivals such as Nokia Oyj and Samsung Electronics amid criticism of its phone line-up.

Meredith also said Motorola's set-top box and networks business would see a sequential revenue increase and an improvement in operating profit margins.

Asked about a recent call by activist investor Carl Icahn for Motorola to break into several units, Meredith would not rule out structural changes.

"I believe there's every opportunity for us to create significant economic value as a whole. Does that mean other options aren't viable? Not at all," Meredith said.

He said Motorola, which shifted its focus earlier this year to profitable growth from market share growth at all costs, was changing its focus again by making a push into the market for lower priced phones.

"There is a shift. We focus on margins obviously. Now we're focused on the balance between that and market share, that includes going after low-tier," he said.

The CFO acknowledged the change in strategy would hurt average selling prices, but said it would help stop Motorola's competitors from taking market share.

Motorola had eased off competing on phone prices in some emerging markets, where larger rival Nokia has managed to gain market share.

Referring to margins, market share and average selling prices, Meredith said: "In an ideal world, balance between those three is what is wanted."

Motorola reported its first profit for this year in the third quarter as the company was weighed down by losses in its mobile device business.

Meredith said problems at the unit related to execution and failure to deliver high-speed wireless phones on time, and were not due to the competitive landscape or macroeconomics.

Meredith declined to say when the mobile device unit would turn a profit but promised that Motorola would see significant improvement in competitiveness in the second half of 2008.

Motorola shares, which have lost 38 percent of their value since October 2006, were up 43 cents or 2.7 percent at $16.18 on the New York Stock Exchange.