Motorola sees slowdown in smartphone sales

Motorola Mobility, the smartphone manufacturer, sold slightly fewer handsets than expected in the fourth quarter and provided a cautious outlook, warning that it expects to report a modest loss for this quarter.

It cited competition from rivals including Apple, whose popular handset goes on sale at Verizon Wireless next month.

The cautious forecast came as Motorola Mobility, which has fought its way back to profitability under Mr Sanjay Jha, chief executive, reported its first results since being spun off from Motorola at the start of the year.

The company’s shares fell by 6 per cent to $32.70 in late trading on Wednesday after closing at $34.83 on the New York Stock Exchange. The stock had risen by 5 per cent since January 4, the stock’s first official trading day.

Verizon Wireless, the largest US mobile network operator, is Motorola Mobility’s largest customer and sells the company’s Android-based Droid smartphones, which have formed the core of the company’s turnaround strategy under Mr Jha.

In a call with analysts, Mr Jha said Motorola had seen “a small slowdown in sales” to Verizon Wireless since the company announced earlier this month that it would begin selling the iPhone on February 14. However, he expressed confidence that Verizon Wireless would continue to market Motorola smartphones heavily along with the new Motorola Xoom tablet that goes on sale with Verizon Wireless next month.

Motorola Mobility said it now expects a loss, excluding some costs, of between $26m or 9 cents a share and $62m or 21 cents a share this quarter after a tax provision of about $25m.

In the fourth quarter Motorola Mobility’s mobile devices segment shipped 4.9m smartphones, bringing the total for the full year to 13.7m. In the same period a year ago, the first quarter that Motorola began selling Android-based smartphones, it sold 2m handsets. In the latest period the mobile devices segment reported operating earnings of $72m compared to a loss of $166m a year earlier, on revenues of $2.4bn up 33 per cent.

The company, which also includes a set-top box ‘Home’ division, reported earnings in the fourth quarter of $80m or 27 cents per share, compared to a loss of $204m or 69 cents per share a year earlier, on revenues that increased by 21 per cent to $3.4bn.

“The improvement in our financial results last year, including profitability in the fourth quarter, is indicative of the progress we have made in delivering innovative smartphones and improving the Mobile Devices business,” said Mr Jha. This year he said Motorola expects to sell between 20m and 23m smartphones and tablet devices.

“Our Home business performed well and remains a premier provider of digital set-tops and end-to-end video solutions,” he said. “With the global opportunities ahead, along with our diversified portfolio, our brand, and our people, we are well positioned to grow, and further improve our financial results in 2011.”

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