Motorola shares shed almost 5% last night to hit a two-year low after it warned that it will miss forecasts, due primarily to the poor performance of its handset unit. This is the third consecutive quarter that the company has missed expectations. Motorola is now forecasting a net loss for Q1 of -$0.07-0.09, including charges, on revenue of $9.2-9.3 billion, down from a January forecast of $10.4-10.6 billion. Analysts were expecting EPS of about $0.17 on sales of $10.46 billion. Full-year sales and profitability are now projected to be "substantially below prior guidance." Profit margins at the phone division plummeted to 4.4%, their lowest in four years. The company suffered from a price war with rival Nokia, slashing handset prices by an average $12. Management expects the handset unit to recover by H2 and forecasts the company will be profitable for the full year. Motorola also announced a management reshuffle and an increase in its share buyback program to $7.5 billion worth of common stock, the latter in response to the demands of activist shareholder Carl Icahn. Zander refrained from comment on rumors that Motorola is about to make a play for Palm Inc. or that Motorola itself might be the target of an LBO.
Sources: Wall Street Journal, Bloomberg, MSNBC, Reuters, MarketWatch (I, II)
Commentary: Could Motorola Be In Play To Private Equity? • Motorola Suffers from High Inventories, Weak Margins • Motorola: No Improvement in Sight
Stocks/ETFs to watch: Motorola Inc. (MOT). Competitors: LM Ericsson Telephone Co. (NASDAQ:ERIC), Nokia Corp. (NYSE:NOK). ETFs: Broadband HOLDRs (NYSE:BDH), Wireless HOLDRs (NYSEARCA:WMH), Vanguard Information Technology ETF (NYSEARCA:VGT)
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