Motorola Beats and Raises; Posts First Profit in Three Quarters

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Motorola said Thursday its Q3 net earnings plunged 94% year-over-year. Its shares are up 3.8% in pre-market trading after the company posted its first profit in three quarters, and revised its Q4 earnings estimates ahead of Street expectations. Net income for the $42.5 billion company was $60 million, or $0.02/share, down from $968 million ($0.39/share) a year earlier. Net of $0.04 charges from job cut and asset write-downs, EPS of $0.06 beat analysts estimates of $0.04. Revenue dropped 17% to $8.81 billion amid weak cellphone sales, matching estimates. Gross margin fell 3.4% to 28.4%. Motorola said it shipped 37.2 million handsets in the quarter, which gives it about a 13% global market share. Its mobile-device unit lost $248 million; Motorola said in July it doesn't expect the unit to turn profitable during 2007. Motorola launched nine new cellphones in October, including a high-end Razr2 which costs $250-300. Executives said in September new, innovative cellphones would help the company break out of its slump. Motorola said that for Q4, it expects EPS from continuing operations of $0.12 to $0.14. Street forecasts had been for EPS of $0.11. "We maintained our focus on increasing cash flow, enhancing profitability and driving growth," said CFO Tom Meredith. "We are beginning to see improvements in our cash conversion cycle and operating cash flow, which will lead to increased financial flexibility," (full earnings call transcript later today). One analyst agreed: "The turnaround is here," Lawrence Harris of Oppenheimer & Co. said in a Bloomberg interview. "The cost-cutting plan is taking hold."

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