This summary is based on the first quarter fiscal 2007 earnings call conducted by Motorola, Inc. (MOT) on 18th April, 2007.
Chief Executive Officer and Chairman: Edward J. Zander
President and Chief Operating Officer Greg Brown
Chief Financial Officer: Thomas J. Meredith
Key Investors Issues
- Net loss was $181 million, or 8 cents per share compared with a profit of $686 million, or 27 cents per share a year earlier.
- Sales declined 1.8% to $9.43 billion, from $9.61 billion a year ago.
- Mobile devices sales fell 15% to $5.4 billion.
- The company sold 45.5 million handset units and had worldwide market share of 17.5%, down from a high of 22% a year ago.
First Quarter Financial Highlights
Revenue in the quarter was $9.4 billion, and GAAP net loss from continuing operations was 9 cents per share, including charges of 11 cents per share of highlighted items.
- Excluding these items, first quarter earnings from continuing operations were 2 cents per share.
- Stock compensation expense is included in both the current and prior year EPS results and is no longer a highlighted item.
From the highlighted items which totaled 11 cents per share, 6 cents per share were acquisition-related charges and in-process R&D expenses.
A charge of approximately 3 cents per share was related to the Telsim securities case settlement which relieves the corporation from a major liability. There was also a business reorganization charge of approximately 2 cents per share related to the previously announced workforce reduction.
Operating cash flow was impacted by profitability, and cash conversion cycle was at 55 days.
The company ended the quarter with net cash of approximately $4.6 billion. The decrease in net cash from year-end is primarily due to approximately $4.1 billion in acquisitions and approximately $2.4 billion of cash used to repurchase shares.
In the first quarter, the company increased its current stock repurchase program by $3 billion to a total of $7.5 billion.
In total, the company purchased 121 million shares, and it now has retired 334 million shares. Approximately $7.1 billion of the $11.1 billion in authorizations has been completed.
The company plans to make enhancements to its cash flow and profitability.
- In January Motorola announced a $400 million savings program, which included a 3,500 person head count reduction, realization of cost synergies from our acquisitions and site rationalizations. The charges for the reduction in force will be completed by the end of the second quarter.
- The management expects to have 18% fewer sites by the end of the year versus what the company has today.
- The company is starting to realize cost savings from its acquisitions.
Outlook
Earnings per share for the second quarter are expected to be in the range of 2 cents to 3 cents per share. This outlook excludes any reorganization of business charges associated with the company’s operating expense reduction initiatives as well as any items of the variety called out in the company’s quarterly earnings release.
For the full year, the company expects to see gradual quarterly improvements in both sales and operating margin in the second half.
- For mobile devices, the management expects a gradual recovery in the second half and to be profitable for the full year.
- For networks in enterprise, the company expects mid-teen annual sales growth and double digit operating margins.
- For connected home, sales are expected to exceed market growth and operating margins to increase compared to the full year 2006.
- Interest income is now expected to be approximately $80 million.
The company has expanded its product portfolio with new products.
Eight new devices were shipped in the first quarter to North America and Latin America - three mass market devices and one mid-tier device for GSM; three new CDMA designs, one new addition for UMTS.
For GSM, the company expanded its W series with global launch of value-priced feature-rich W370, W205, W215 for the mass market and added the W510 for the mid tier.
