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By Kris Tuttle

Just reviewing the quarterly report and conference call right now without any deep analysis. Company continues to make steady progress. We noted some downgrades in the last few weeks. However the numbers and posted growth seem to be fairly positive news.

Beyond the improved income statement, the balance sheet got stronger as well. Operating cash flow is $502M and reduced debt increased net cash to $5.6B or $2.35/share.

Enterprise Mobility remained a stead performer with little growth but solid 16.5% operating margins. This is not a segment of the business we are excited about, but the results, orders and fundamentals are all solid and will support the value we ascribe to this division in the context of the coming corporate spin-off in 1Q2011. Expectations are for 7-9% growth, some reductions in operating expenses are going to be done as well.

Mobile Devices was profitable for the first time in over 3 years (on a non-GAAP basis.) Smartphone shipments were 3.8M units, which is up 40% sequentially. 12 new devices were launched during the course of the quarter and position the company well for the holiday season. On the negative side this suggests that the basic phone business is dropping off fast.

The company now expects to hit the “upper end” of its guide range of 12 to 14 million smartphone devices.

The Home division even showed some growth and improved margins both YoY and sequentially. Motorola will remain focused on measured enhancement of the portfolio and promoting better converged experiences. Expectations for the Home division in Q4 are for continued improvement.

From the Q&A it’s clear many analysts are worried about the impact of the iPhone at Verizon (NYSE:VZ) on the Motorola business there. With that coming in a seasonly weak Q1, and just at the time of the separation, that might create some jitters.

The relationship with Ericsson (NASDAQ:ERIC) sounds like a pretty strategic move and the company is making decisions in a clear and stock-friendly fashion.

Enterprise will become a greater focus for Mobile Devices and the company will be marketing more there both directly and indirectly via their existing partners.

We continue to see the story unfold towards our IV of $11/share. The major obstacles are the impact of the iPhone at Verizon and the perception that the company will have a hard time differentiating itself enough on the Android platform.

Disclosure: Long positions in MOT equity.

Source: Motorola Earnings Finally Show Top Line Growth

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