CHICAGO, (AP) -Motorola Inc.’s missed forecast of its third-quarter cell-phone sales is threatening to derail a Razr-fueled runup in its stock.
Investors punished the handset maker after it fell about half a billion dollars short of its sales guidance, pushing its stock down more than 7 percent in after-hours trading following the issuance of its quarterly results.
After years of badly lagging Finnish rival Nokia Corp., the Schaumburg, Ill., company has raised its market share steadily in recent quarters and become a strong runnerup. It said its share climbed to 22.4 percent in the quarter, up from 18.6 percent a year earlier.
But its $10.6 billion in revenue, while up 17 percent from the third quarter of 2005, was well under analysts’ consensus estimate of $11.07 billion and Motorola’s own forecast as it juggles new products and tries to close the gap on Nokia without sacrificing profit margins.
“Investor expectations were that Motorola would be firing on all 12 cylinders, which is not a trivial task,” Inder Singh, an analyst for Prudential Financial, said in a research note. “We believe that Motorola is a well-positioned handset vendor. However, increasing market share while improving operating margins at the same time may prove difficult to achieve over the longer term.”
Standard and Poor’s analyst Kenneth Leon said missing on revenues also likely reflects pressure on Motorola from competitors coming out with new products.
“Directionally, the company still looks positive,” he said. “For the holiday season, the company does have strong products going into the fourth quarter.”
Motorola’s profits were down 45 percent, although in line with expectations. Earnings for the July-through-September period were $968 million, or 39 cents a share, down from $1.75 billion, or 69 cents a share, a year earlier.
Excluding certain items, operating earnings were 34 cents per share, matching the consensus estimate of analysts surveyed by Thomson Financial.
Chief Executive Ed Zander blamed the shortfall in part on delayed capital spending by customers in Europe, the Middle East and Africa and customers’ decisions to put off buying its handsets while awaiting its new dual-mode phones, due to ship in the fourth quarter.
“There was (marketplace) consolidation going on across the world, but it doesn’t let us off the hook for not forecasting correctly,” he told analysts on a conference call.
Revenue from Motorola’s cell-phone division jumped 26 percent to $7.03 billion. The company shipped 53.7 million handsets, an increase of 39 percent from a year earlier but shy of the 55 million that analysts expected.
Morningstar analyst John Slack said Motorola showed no significant problems but its quarter was “a little soft.” He said results likely would have been better had the company not been in transition to the Krzr, the Razr update which features a music player and a camera and was shipped only last month.
“With the stock being up 30 percent since July, it’s more of a ‘What have you done for me lately’ situation,” he said.
Sales from Motorola’s networks and enterprise business were up only slightly to $2.78 billion.