Motorola Postpones Spinoff After $397M 3Q Loss

Maker of communications gear lost $397 million in the July-September period, delaying the planned spin-off of its cell phone unit originally planned for third quarter of next year.

NEW YORK (AP) -- Motorola Inc. posted a hefty loss in the third quarter Thursday, citing the continued troubles of its cell phone division. Motorola said it will postpone the planned spin-off of the unit, originally planned for the third quarter of next year.

The maker of communications gear lost $397 million, or 18 cents per share, in the July-September period. It had earned $60 million, or 3 cents per share, in the same period a year ago.

Sales fell 15 percent to $7.48 billion.

The loss included 23 cents of charges, mostly for restructuring costs. Without the charges, Motorola would have earned 5 cents a share, reflecting unexpectedly strong results in its non-cell phone operations. Analysts polled by Thomson Reuters had on average expected the company to earn 2 cents per share on revenue of $7.82 billion.

Shares of Motorola were up 19 cents, or 3.5 percent, at $5.65 in pre-market trading. Futures for the broader indexes were also up.

For the fourth quarter, Motorola said it expects to earn 2 cents to 4 cents per share. Analysts polled by Thomson Reuters had expected the company to earn 7 cents per share in the quarter, excluding items.

Chief executive Greg Brown said the company was extending its cost cuts across its operations, which should lead to savings of $800 million next year. The company has cut thousands of jobs this year, but it didn't announce any specific new cuts on Thursday.

Motorola sold 25.4 million cell phones in the third quarter, down from the 28.1 million it sold in the second quarter. The company had said it expected a slight decline.

The cell phone unit lost $840 million, including a $370 million write-down of inventory. Revenue was $3.1 billion.

Sanjay Jha, who was appointed in August to lead the handset division, said the weak economy and stresses in the financial market were main reasons for the postponed spin-off. He said the unit would slim down its product portfolio and become a leaner organization.

Jha said the company had 20 major platforms for cell phones, making development unwieldy yet leaving Motorola with few products in the two categories that have been in demand this year: "smart" phones and very cheap phones.

He is pruning the portfolio to focus on three software systems: Windows Mobile, which Motorola already uses on a few smart phones; P2K, its own system, used on the Razr phone; and Android, a free operating system from Google Inc. Competitor HTC Corp. recently launched the first Android phone. Jha said Motorola will have one by the 2009 holiday season.

Designers at Motorola have been too focused on making "bright shiny objects," Jha said. In the future, wants them to focus more on making phones easy to use.

The troubles of the cell phone division stem from its inability to produce a follow-up to a phone that was, for a while, the "bright shiny object" everyone had to have: the Razr phone.

Jha also said Motorola will pull back from the cell phone markets of Europe and parts of Asia, though Jha said China will remain a focus for the company, along with the Americas.

Motorola is not alone in seeing a decline in cell phone sales. Research firm IDC said Thursday that global handset shipments declined 0.4 percent from the second quarter to the third, even though the quarter normally sees a pre-holiday ramp-up.

Sales at Motorola's healthier units were essentially flat, and they boosted profits.

Home and Networks Mobility, which makes cable-TV set-top boxes, modems and related gear, saw its operating earnings increase 65 percent to $263 million, on $2.4 billion in sales.

Enterprise Mobility, which makes police radios and other communications equipment for organizations, posted operating earnings of $403 million, up 23 percent, on sales of $2 billion.

More in Industry 4.0