A better-than-expected for Greg Brown’s Motorola, including solid results from both non-mobile phone divisions, and encouraging guidance: The company beat the Street’s sales projection by a large amount, broke even, and sold about 1.5 million more phones than expected, maintaining its market share. Shares are up 12% to $8.60 in pre-market trading.
Especially strong: The “home and networks mobility” division, which includes set-top boxes and wireless network infrastructure, posted 7% year-over-year sales growth and 28% operating income growth.
Motorola expects its split-up to occur during Q3 of next year, Brown announced during the call, and said they’re currently working through stuff like splitting up intellectual property, figuring out who gets the Motorola brand, etc. Still no announcement on who the CEO will be.
Meanwhile, the company is planning to launch 34 new mobile phones in Q3 and Q4, almost twice the number of new phones it launched in the first half, including more smartphones, touchscreen phones, music phones, etc. But Motorola expects to lose market share in Q3 because it’s weak in Asia, where a lot of the growth will be.
Revenue: $8.1 billion, vs. $7.7 billion consensus
EPS: $0.02 after one-time items, vs. -$0.03 consensus
mobile phones shipped: 28.1 million, vs. 26.6 million Reuters consensus
Q3 EPS: $0.00-$0.02, vs. $0.01 consensus
2008 EPS: $0.06-$0.08, vs. $0.01 consensus
LIVE Conference Call Notes:
7:58 Waiting for call to begin.
8:02 Call begins. Standard disclaimers.
8:03 Greg Brown going over numbers. Over $200 million of operating cash, finished qtr with $100 million of net cash. Enhanced mobile devices product portfolio, established new leaders in key roles, etc. Remained focused on continuing improvements in non-mobile phone businesses.
8:05 Continued plan to separate into two separate, public companies. Second half and 2009 mobile phones focused on improved platforms, 3G, touch, etc. Will further enable mobile devices to compete.
8:06 Paul: Year-over-year sales drop due to lower mobile phone sales, offset by better results from other two divisions. EPS due to overall improved gross margin. Compared to last year, EPS essentially flat. Opex lower by $264 million. On track to achieve $1 billion in overall cost reduction in 2008; 60% in mobile devices.
8:09 More stats from release. Expect continued strong cash flow generation from non-mobile phone divisions. Expect to end net cash level comparable to $4.3 billion that we had in 2007. Excluding items, expect Q3 EPS in range of flat to 2 cents per share, full year 6 to 8 cents per share.
8:10 Have spend a significant amount of time working on separation, including capital structure, intellectual property, etc. While making good progress, not yet complete. All of areas extraordinarily complex, including thousands of patents, multiple tax and legal jusisdictions. Plus HR, marketing, supply chain are all fused. Over 150 shared facilities, operations in over 100 countries, all of which are being evaluated. Are reviewing cost structure. Goal is to identify further efficiencies. With respect of timing, expect separation and distribution of shares to occur in Q3 of next year.
8:12 Overall, phone ASP was down due primarily to mix. NA still largest; 48% of total mobile phone sales, 27% LatAm. Operating loss increased, partially offset by lower operating expenses. Over 12 million W series devices, 3 million Razrs, 1 million ROKRs, 1 million Razr2s.
8:15 50 new devices this year; more in second half than first. Roadmap for 2009 reflects broader, richer portofolio. Roughly half of new devices UMTS, up from 15% this year. UI, messaging, touch, navigation focus.
8:17 Set-top boxes: 4.9 million digital video devices. Gained market share, remain global market leader. Expect sequential decline, but not same extent as last year. Unit growth expected strong rest of year.
8:19 Continue to invest in WiMax and LTE. 80+ engagements. Expect to continue to ramp WiMax shipments, expect significant ability to sell next year. Involved in Verizon LTE trials. Lower sales expected y/y because decline in iDen and divestiture of a business.
8:21 Enterprise Operating margin results outstanding. 18.6% comared to 15.7% last year. Higher sales, favourable product mix. NA sales declined approx 2% due to large comp US Postal Service deals. Increased 5% if you ignore that. Strong demand across enterprise mobility portfolio. Good sales for Beijing Olympics for 2-way radio systems and LANs.
8:23 Announced AirDefense deal, security firm. Expect y/y growth in sales, op margins for enterprise mobility.
8:24 Splitup not distracting us!
8:25 Q&A to begin
8:27 Expect mobile phone sales to be slightly down sequentially. New products, better mix, higher margins. What is view of overall market? Any markets strength or weakness? Continue to watch macro closely, clearly keep an eye on that globally. From an overall perspective, expect 10% unit growth TAM, will watch geographies. Some resiliency in North America, we grew share, but going to watch very closely.
8:28 Strength of GSM? Gross margins constant? Or expecting to get better? In terms of networks, profitable in CDMA, iDen, GSM, profitable overall in segment, including investment in 4G. GSM showed strength driven by additions, and a large EMEA contract. Expect to perform solidly in Q3. In annual standpoint, excluding ECC, expect sales in networks to decline y/y with a sequential decline in Q3.
8:31 No break even goal put out at this point.
8:31 Q3 mobile devices guiding slightly down sequentially, improvement in operating loss. In terms of other businesses, overall trends in home and networks, 4g broadband, etc., strong long-term objectives and trends. In the year for home and networks, expect y/y margin improvements. Mid single y/y sales growth, etc. Handset industry: Up Q3? TAM of about 317 million, up from 295 million in Q2, expect TAM to grow sequentially, that growth will be largely in Asia and EMEA, where portfolio challenged. Expect new products to address that, expect to remain strong in LatAM and NA.
8:35 34 new products in second half expected. New product GM to have greater contrib to financial improvement in second half.
8:37 More smartphones, qwerty, touch, navigation coming.
8:38 ForEx relatively little impact on the quarter. Sales mix is about 50/50 US to non-US. Outside of US, still do a lot of business in USD, or currencies that don’t have a lot of volatility to USD. Separation, planning to be ready in Q3 of 2009, need to make continued progress and predictability. $20-30 million charges per quarter expected. CEO search: Very good progress. Keep you posted. When something to announce, will do so accordingly.
8:45 Yes, more QWERTY and touch smartphones coming. MING in China for example. Lot of different form factors, will participate in many of those. Acquired SoundBuzz is Asia.
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