This summary is based on the second quarter fiscal 2008 earnings call conducted by Motorola Inc. (MOT) on July 31, 2008.
Management:
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President and CEO: Greg Browne
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CFO: Paul Liska
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Corporate VP IR: Dean Lindroth
Key Investors Issues
- Sales were $8.1 billion, down 7% from $8.73 billion in 2007.
- Earnings were $4 million or 2 cents per share, up from a loss of 28 million or 2 cents a share in 2007.
- The firm announced its intent to acquire AirDefense.
Half Year Highlights:
- Net sales were $15.5 billion, down 14.8% from $18.2 billion in the prior year.
- The firm realized a net loss of $190 million or 8 cents a share, up 9% from $209 million or 11 cents a share in 2007.
Second Quarter Highlights
Sales were $8.1 billion, down 7% from $8.73 billion in the prior year due to lower sale in mobile devices, partially offset by higher sales in Home and Networks Mobility and Enterprise Mobility Solutions.
- Earnings were $4 million or 2 cents per share, up from a loss of 28 million or 2 cents a share in 2007 due to an improved overall gross margin percentage and lower operating expenses as well as higher non-operating income.
- Operating expenses were lower by $264 million compared to the second quarter of last year and have declined by $469 million compared to the first half of last year.
- The firm remains on track to achieve the $1 billion in overall cost structure reduction in 2008, that I outlined on our last call.
- Compared to the year-ago quarter, a higher gross margin percentage and the reduction in operating expenses more than offset the impact of lower sales.
Total other income and expense was a net expense of $2 million compared to net income of $54 million in the second quarter of last year.
- The year-over-year decline was due primarily to lower net interest income resulting from lower average cash balances and lower interest rates.
- The overall cash inflow was $204 million compared to a $343 million cash outflow last quarter and were strong in both Home and Networks Mobility and Enterprise Mobility Solutions.
- Motorola ended the period with total cash of $7.8 billion and the net cash balance was $3.6 billion, up from $3.5 billion at the end of the first quarter.
Update on the Separation:]
- Over the past several months, the firm has spent a significant amount of time working on many aspects of the separation, including intellectual property, tax and capital structure.
- Planning activities are in progress for the centralized functional organizations including finance, IT, human resources, marketing and supply chain.
- The firm is reviewing the cost structure in line with the goal to identify further operating efficiencies and process improvements that can be implemented to optimize the future cost structure of the two businesses.
- It expects the actual separation and distribution of shares to occur in the third quarter of next year.
Business Operations:
- Mobile Devices sales were $3.3 billion, up slightly from the first quarter.
- Unit shipments were $28.1 million, and the estimated market share was unchanged from the first quarter at 9.5%.
- Overall, ASP was down slightly to $118 compared to the first quarter, due primarily to mix.
- North America was still the largest region and accounted for 48% of total Mobile Devices sales.
Latin America accounted for 27% of sales, while Asia-Pac and EMEA made up the remaining 14% and 11%, respectively.
- Operating loss was $340 million compared to $267 million operating loss in the second quarter of last year.
- The operating loss increased over last year as a result of lower sales, which was partially offset by lower operating expenses.
- Top sellers included over 12 million W Series devices, over 3 million RAZRs, over 1 million ROKR series and over 1 million RAZR2s.
- The firm began shipping 10 new products, including the CDMA W755, which is doing very well in the US.
- The UMTS Z8m in Korea and three touchscreen smart phones, the A1800, A1600 and AA10 that refresh our popular MING series in China.
The firm announced the MOTOZINE ZN5, in which it combined Motorola''s ModeShift technology, Kodak''s Perfect Touch technology and ultrafast camera and one-click photo sharing, resulting in a superior mobile imaging experience.
- The ZN5 is currently shipping into China and will roll out to other markets in the coming months.
- The roadmap for 2009 reflects a broader, richer portfolio with nearly half of the new handset introductions being UMTS devices.
- Looking ahead to the third quarter in Mobile Devices, the firm anticipates sales to be down slightly with an improvement in the operating loss as compared to the second quarter.
