As Henry Blodget posted earlier, Motorola’s Q4 sales were terrible (as expected), with the handset division shrinking 38% year-over-year and losing $388 million. Overall, the company slightly exceeded Street revenue expectations — $9.65 billion vs. $9.0 billion — but missed consensus EPS by a wide margin, posting $0.05 vs. the $0.13 that the Street expected.
The biggest cause for concern: Motorola hasn’t had a hit phone since launching the Razr in 2004. The thin, iconic phone, which sells for pennies, is still selling strong — 8+ million in Q4. But its would-be successor, the high-end, $300-or-so Razr2, is a dud: Despite wide distribution, Motorola sold only 1.5 million in Q4. For comparison, Apple sold 2.3 million iPhones last quarter — with just one U.S. carrier and a $399 price tag.
The company continues to say that fixing their handset lineup is their most important project. (We’ve heard that many times before.) But new CEO Greg Brown might actually have the right idea: He is focusing on software — the real reason the iPhone is years ahead of his company’s products — and putting different chips inside Motorola phones, including a new deal with Qualcomm. At best, this will help the company out next year. Until then, expect more of the same from Motorola. Release, Webcast
Live Webcast notes.
8:04 Going over financial stats.
8:06 Aggressively rationalizing costs with focus on mobile devices and corp. g&a. Timely stream of innovative products. Intent on software and silicon w/ faster time to market. Expanding 3G and 2G. And introducing more products. “We recognise there is a lot more work to be done.”
8:08 More stats from the release.
8:12 Despite sequential improvement, ROIC was lower. Taking incremental actions to save $500 million. Had approx 65k employees.
8:13 Greg Brown returns. Mobile devices $4.8 billion on 41 million units. 12.4% est. market share. North America and Latin America 53% and 20% of sales, respectively. Product porfolio a “challenge” in other markets. Top priorities remain software and silicon — broader portfolio w/ lower cost devices.
8:15 Sold over 8 million RAZRs, over 3 million KRZRs. 1.5 million RAZR2s.
8:16 At CES we announced Moto Z10, with capture/edit/upload content to YouTube/Facebook, etc.
8:17 In Q1 we expect typical seasonal sequential trends. Sales will be down, resulting in operating loss. Not satisfied with where we are.
8:17 Home and networks delivering well. Sales $2.7 billion, up 11% y/y, up 14% q/q.
8:18 Maintained market leadership in digital entertainment, 3.4 million devices, including a record quarter for IP devices. HDDVR and IP devices represented 37% and 22% respectively. Major wins including BT.
8:20 Overall cellular network sales $1.6 billion due to higher GSM sales. Pricing pressure continues. That said, profitable in each of 3 main technologies. Investing in future technologies. Having said that, industry is highly competitive and don’t expect that to change very soon.
8:21 Enterprise mobility sales up due to Symbol acquisition.
8:23 Retail, logistics, transportation verticals leading Symbol growth. Integration complete. Won’t give standalone Symbol results anymore.
8:25 Q1 will be challenging. Must get to work.
8:25 Q&A begins.
8:26 Guidance: Trimmed handset losses in Q4. Still trying to hold market share or drive ASPs? Not guiding any colour on ASPs. In addition to seasonal, sequential trends, will experience further mobile device revenue and units. From market share perspective, expect to lose share. Typically a 10%-15% decline; ours will be greater.
8:27 Combination of slowing demand for products, including some of newer products. Competitive landscape has intensified. Also weakness in low-end 3G and multimedia.
8:28 Macro environment for handsets? Have to watch market very closely. Challenges in Motorola are driven largely by product portfolio. Need to be more consistent in new product introductions. Will be vigilant watching external market and will react accordingly. Not a big shift in demand — problem is Motorola-specific. Strong market environments in Asia. Western Europe and US probably not as robust; seasonal trends more pronounced.
8:30 W/ Qualcomm announcement, now three silicon providers. What happened to platform strategy? QCOM affords us more options for low- to mid-tier 3G devices. Lower cost devices, broader portfolio. Freescale will continue to be an important supplier; also mid- to high-tier with TI.
8:32 Why 3 though? More volume? More variety? Yes, three suppliers for now. Think it’s good move strategically and financially over time.
8:33 How will macro impact enteprise and home/network biz? Watching W. Europe very closely. Not seeing anything significant yet, but fluid and have to watch closely. Cost reduction emphasis in mobile devices and corporate g&a.
8:35 “Some of the best [design] talent in the industry.” Have to design “iconic” software, UI. Tell me about it! Brand remains “remarkably strong.” Really? Will be surgical w/ marketing spend.
8:36 Reorganized some engineers into specific divisions.
8:37 Freescale settlement? Terms of settlement confidential. Given loss of scale and growth in India and China, how can you go after growth areas without the scale? Combination of two things: Have got to refresh product portfolio as soon as we can. You’ve heard that before. (Yep!) Have a fairly strong presence in India, decent in China. Consider possibility of restructuring the company? Focus is absolutely improving profitability in mobile devices, and increasing leadership in other businesses. All shareholders will benefit.
8:42 Guidance? Mobile device recovery would take place in 2009? When new units rolling out? Only guidance thru Q1. Won’t announce new products in advance — will announce them as they come. But that’s the most important thing we can do.
8:45 No colour on iDEN problems w/ Sprint Nextel. Working closely with them. Not guiding any significant difference from Q4.
8:46 Fixed costs related to manu. plants, etc. How much has impact on Q1 outlook? Does impact gross margin. As we talk at cost reduction opportunities, I think that given lower unit volumes we are actively looking how to optimise manu. facilities. Look to improve on configuration of footprint.
8:47 Given crappy portfolio, still going to lose share this year? Can only speculate on Q1.
8:48 No impact from Qualcomm/Broadcom legal dispute but watching.
8:50 Asset writeoff relates to prior acquisition, will hear more about that as quarter unfolds. Q1 guidance fall is mostly mobile devices.
8:54 Required to mark to market anything in cash/short term/long term investments. Did take charge on mark to market basis on one investment.
8:55 Mobile market share down in EMEA, down in LatAm, slightly up in North America, down in China. Already begun attacking cost structure. Will move “swiftly.”
8:59 Will mobile devices break even this year? Not giving any guidance past Q1. Headcount? 59,000 a good number? Don’t have a set number.
9:00 How many handsets do you need to break even? Not going to answer that.
9:03 Call ends.
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