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Motorola's Mobile Device Sales Plummet

Motorola earnings
Despite long efforts at a turnaround, embattled wireless giant Motorola (NYSE: MOT) today reported continued pain with worse-than-expected sales and earnings, and a precipitous drop in revenue from its once-mighty consumer mobile business.

The company reported a 28 percent drop in first-quarter sales to $5.37 billion, down from $7.44 billion a year ago and below forecasts by Wall Street -- analysts polled by Thomson Reuters had anticipated $5.55 billion in sales.

That decline in sales led to a $0.13 per-share loss for the first three months of the year, excluding income from discontinued operations, which proved wider than the loss of $0.11 a share analysts had predicted.

The company's mobile devices segment was hit especially hard, with sales tanking to the tune of a 45 percent decline from last year, down to $1.8 billion. That led to an operating loss of $509 million, versus $418 million in the same quarter of 2008.

During the quarter, Motorola shipped 14.7 million handsets and estimates its share of the global market to be 6 percent, according to the company.

Company execs said the results came even after "aggressive actions to reduce costs," according to a statement by Sanjay Jha, Motorola co-CEO and chief executive of its mobile devices unit.

The company's enterprise mobility unit also saw a decrease in sales, down 11 percent from $1.8 billion to $1.5 billion for the first quarter. On the home and network mobile front, sales were down 16 percent from $2.3 billion to $1.9 billion.

"We will continue to manage our costs to ensure alignment with current market conditions," Greg Brown, president and co-CEO of Motorola and CEO of broadband mobility solutions, said in a statement. "We are executing with operational and financial discipline while we make targeted investments for our future."

Bet on Android

Perhaps one bright spot for Motorola's future is the release of Android-based smartphones later this year. Google-backed Android offers handset makers a low-cost, open source alternative to proprietary mobile software, and integrates features such as Gmail and Google Maps.

Android also now includes a marketplace for software downloads -- a feature increasingly seen as a must-have for mobile devices, following the success of Apple's App Store for its iPhone.

"We remain on track for Android releases in the fourth quarter," Jha told analysts during today's earnings call. "Android is attracting significant developer interest, with over 3,000 applications on the market, and Motorola plans to offer a differentiated experience, with messaging and social networking apps for models in the high-tier and mid-tier."

Motorola plans to launch its Android handsets on multiple carriers, Jha added.

With rumors of new Apple (NASDAQ: AAPL) iPhones coming later this year, along with planned released by Palm -- the hotly anticipated Palm Pre with its Linux-based WebOS software -- and Research in Motion, not to mention other Android-based devices from rivals like Samsung, Motorola's likely to have its work cut out for it to promote its new phones.

When asked during today's earnings call how the company plans to stand out in this year's competitive smartphone market, Jha gave few hints.

"It's tough to answer that without tipping my hand, but we believe messaging and Web browsing are important," he said. "Android is great platform for the mobile Internet experience, we like what it brings to the table and we are focusing on a number of different areas right now."

Shifting mobile landscape

Motorola's numbers check in at a time when other major phone makers show checkered performance, while smaller smartphone makers -- Apple and Research in Motion -- are outpacing competitors.

Apple blew away Wall Street estimates for its second fiscal quarter of 2009, posting above-average earnings and revenue despite the economic slump, thanks in part to strength in iPhone sales.

The company said earnings totaled $1.21 billion, or $1.33 per share, on revenue of $8.16 billion. And in defiance of the recession, Apple's performance topped Apple's numbers a year ago, when it posted revenue of $7.51 billion and earnings of $1.05 billion, or $1.16 per share.

Likewise, Research In Motion (NASDAQ: RIMM) also bucked the downturn, posting impressive sales in its most recent quarter -- with the lion's share of revenue, 83 percent, coming from its stable of recently released smartphones.

RIM reported revenue of $3.46 billion for the fourth fiscal quarter of 2009, a 24.5 percent jump from $2.78 billion in the previous quarter and a staggering 84 percent increase over the same quarter in 2008.

During the quarter, RIM shipped roughly 7.8 million devices, it said.

Meanwhile, Motorola isn't alone among the big players in mobile phones feeling pain from a combination of the downturn and other business woes. Sony Ericsson, for instance, is putting plans for any Android-based smartphones on the low-priority list after announcing layoffs, a $382 million loss for the first quarter and a 35 percent drop in shipments year-over-year.

The company announced in its earnings report that it will cut 2,000 jobs, after trimming 2,000 last year, and that phone shipments fell 35 percent, to 14.5 million between January and March.

Earnings for Nokia, the world's largest cell phone maker, plummeted to €122 million -- down from €1.2 billion a year earlier -- on a decrease in revenue that saw Nokia's (NYSE: NOK) sales drop from €12.6 billion to €9.2 billion compared to a year ago. Nokia said that it shipped about 93.2 million handsets during the quarter, a decline of 19 percent from a year earlier, and a roughly 18 percent drop compared to the fourth quarter.