Mobile sales drop hits Motorola earnings

Two days after it restructured operations, Motorola Thursday reported that flagging sales of mobile devices were a factor in its second-quarter loss of US$28 million, or $0.01 per share.

The telecommunications device maker posted income of $1.38 million, or $0.55 cents a share, one year earlier. Revenue declined by 19 percent to $8.73 billion from $10.82 billion one year earlier.

The drop was expected: Motorola issued preliminary financials last week, warning that its results would be lower than had been forecast.

The company said Thursday that excluding one-time costs, it would have earned $0.02 per share. Analysts surveyed by Thomson Financial, who revised estimates lower after last week’s warning, were forecasting break-even results on sales of $8.64 billion.

Layoffs and other one-time charges were responsible for losses amounting to $0.04 per share. But the loss for the quarter underscores the company’s beleaguered mobile device business, which has been outflanked by rivals including Apple.

The pressure will continue. Motorola announced that it expects earnings in the third quarter to be equal to or slightly higher than the second quarter, and that its mobile devices unit will probably not be profitable this year.

The company saw a drop in mobile device sales in Asia, a hot market where vendors are trying to get a big share of the market in fast growing economies, as North American and European markets become saturated with mobile phones.

Motorola has taken steps to address its problems. The vendor announced Tuesday that it’s restructuring into three business divisions: Mobile Devices, Home and Networks Mobility, and Enterprise Mobility Solutions. It also has a new chief of its mobile unit, Stu Reed.

Motorola CEO Ed Zander has been under pressure to resign. He attracted criticism from big-name investor Carl Icahn earlier this year, and recently has been attacked by activist shareholder Eric Jackson for the way he’s running the company.

Although Motorola has taken steps to cut costs, a core challenge for the company is product design in the competitive handset arena. Its Razr device was praised for its design, but in a fast-paced market quickly became an also-ran, under a barrage of products from rivals that in addition to Apple include Nokia, Samsung and LG.

Despite expecting mobile phone sales to be under increasing pressure, Motorola did say that it expected its overall financial results to improve during the second half of the year.

Thursday morning, Motorola shares were trading at $18.18, up $0.18 from its opening.

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