Middle-east Arab News Opinion | Asharq Al-awsat

Motorola Targets Nokia After Strong 2Q | ASHARQ AL-AWSAT English Archive 2005 -2017
Select Page

CHICAGO, AP – The Razr’s extended run of success is turning the world cell-phone market into a duel between Nokia Corp. and Motorola Inc., which is riding the hot handset to heights it hasn’t seen since the 1990s.

While the Finnish company continues to hold a double-digit lead in market share, Motorola said it boosted its share to 22 percent in the second quarter as it makes inroads beyond the U.S. market it now rules. That’s up from 13 percent just 18 months ago, thanks to the slick Razr phones that have re-energized the once-slumping company.

Wall Street is impressed, driving up its shares more than 8 percent to $20.85 in after-hours activity Wednesday following stronger-than-expected second-quarter earnings, sales and shipment numbers.

“They’re charging hard,” Morningstar analyst John Slack said of Schaumburg, Ill.-based Motorola. “It’s increasingly becoming a two-horse race more than anything. It’s really becoming Nokia and Motorola now, with well over 50 percent of the market between them.”

Nokia still holds about 34 percent of the handset market. But Motorola used a seventh consecutive quarter of growth to strengthen its position as the clear runner-up, putting some distance between it and other top-five manufacturers Sony Ericsson, South Korea’s Samsung and LG Electronics Inc.

Fitch Ratings said Motorola is likely to continue gaining share. Upgrading the company’s ratings, it cited its competitive advantage in the heavily brand-conscious and rapidly growing China and India markets and its significant scale, which should enable product introductions at different price points.

Earnings jumped 48 percent on the strength of record handset sales and shipments that far outpaced expectations, particularly the shipment of 51.9 million cell phones to a market that supposedly was slowing down.

Net income was $1.38 billion, or 55 cents per share, up from $933 million, or 37 cents per share a year earlier. That walloped the estimate of analysts surveyed by Thomson Financial, who had pegged earnings at 31 cents a share based on the company’s most recent guidance.

Revenue was $10.9 billion, up 29 percent from $8.4 billion a year ago and well above the $10.3 billion projected by analysts.

The company forecast sales between $10.9 billion and $11.1 billion in the third quarter, an increase of 20 to 23 percent. It cited the growth of the Razr family, which saw its 50 millionth unit shipped this week since its launch in the fourth quarter of 2004.

“Make no mistake about it, Razr has established itself as a brand and rivals, I believe, things like iPod and Xbox as the top consumer electronics brand around the world,” CEO Ed Zander said on a conference call, promising more new Razrs next week at an analyst meeting.

Sales in the cell-phone unit, which accounted for nearly two-thirds of the company total, rose 46 percent to $7.14 billion. The division also saw operating earnings jump 62 percent to $799 million.

Motorola’s network business, focusing on equipment for cellular carriers, continued to be a relative weakness but improved over the first quarter. Sales rose 3 percent to $2.90 billion, although operating earnings in the unit fell 22 percent to $386 million.

The connected home division, whose products include digital set-tops and cable modems, saw operating earnings rise 70 percent from a year ago to $56 million on an 8 percent increase in sales, to $803 million.