Motorola Burned on Q2 Sales Hopes

Thanks to weak cell phone shipments in Europe and Asia, Motorola  said it expects second-quarter sales to be
between $8.6 billion to $8.7 billion and that its mobile device unit will
not be profitable for the full year.

The news, which sent Motorola shares down 20 cents to $17.75 in morning
trading, has prompted at least one analyst to say Samsung would catch
Motorola before Motorola catches market leader Nokia .

Motorola had originally targeted $9.4 billion in revenues for Q2. The company
said in a statement it expects Q2 mobile device shipments to be
approximately 35 million to 36 million handsets, or almost 10 million fewer units
than the company sold in Q1.

The company also said it expects a second-quarter loss per share of 2 cents
to 4 cents from continuing operations, including charges associated with the
layoffs it announced.

Motorola added that its mobile device business is expected to have a larger
operating loss in Q2 compared to Q1, and the unit will not be profitable for
the full year. In related news, the company said Stu Reed, executive vice
president of Motorola’s supply chain organization, has been installed as
president of Motorola’s mobile device unit.

Motorola said it will provide further perspective on the year during the
company’s quarterly earnings call on Thursday, July 19. The company will also
provide an update on the its strategy and progress at its
financial analyst meeting, which has been rescheduled for sometime in September.

No buts about it, Motorola has had a rough year.

With competition to pump out the latest and greatest smartphones at level
10, Motorola has been struggling to keep up with Nokia, which has attracted
interest with strong multimedia capabilities in its newer handhelds. The
high-profile splash
of Apple’s new iPhone is anything but aloe for these burns.

In January, Motorola slashed
3,500 jobs after a 48 percent income drop in Q4 2006. Two months later, the
company lowered
Q1 guidance, citing poor performance of, what else, its cell phone unit.

Despite the warnings and job cuts, Motorola launched
a new line of multimedia-intensive Razrs and Rokrs at a Mew York press event
in May, only to temper any enthusiasm by announcing 4,000 more job cuts two
weeks later.

The flagging financials have left some investors, including luminary
investor Carl Icahn, to demand CEO Ed Zander to step down. Icahn, not one to
watch a company he has a fiduciary interest in struggle, was denied a board
seat in May after a proxy fight.

Experts speculate that shareholders are giving Zander, who enjoyed success
at Sun Microsystems , ample opportunity to right the

But at what cost? Cowen and Company analyst Matthew Hoffman surmised in a
research note Thursday that “instead of catching Nokia for the global share
lead, it now looks as though Samsung will catch Motorola.”

“We believe Motorola’s depressed unit volumes are company specific in 2Q,”
Hoffman said in his note. “We expect strong quarter-to-quarter unit progress
from Samsung will be reported tonight, possibly exceeding Motorola for

Motorola has not been alone in its struggles; Palm is suffering from similar
handset weaknesses and sold a
25 percent stake to private-equity firm Elevation Partners under a
recapitalization plan.

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