This summary is based on the first quarter fiscal 2008 earnings call conducted by Motorola Inc. (MOT) on April 24, 2008.
Management:
President and CEO: Greg Brown
EVP and CFO: Paul Liska
Corporate VP of IR: Dean Lindroth
Key Investors Issues
- The company reported EPS loss of 9 cents a share compared to a loss of 8 cents a share last year.
- Net loss was $194 million compared to prior-year net loss of $181 million.
- Net revenue fell 21% to $7.45 billion.
First Quarter Highlights
Sales were approximately $7.4 billion, down 21% compared to the first quarter of last year.
The year-on-year sales decline is all attributable to lower sales in Mobile Devices.
On a GAAP basis, the company had a loss from continuing operations of 9 cents per share, which is flat with the first quarter of last year.
The GAAP results include a net charge for highlighted items of 4 cents per share, primarily related to a charge associated with workforce reductions. The loss per share was 5 cents, compared to a profit of 2 cents per share in the first quarter of last year.
- Gross margin percentage for the company was essentially flat from the fourth quarter, but up from the first quarter of last year, primarily a function of overall sales mix.
- There was a $1 billion in net cost reductions.
The company reduced operating expenses by $205 million compared to the first quarter of last year, and $138 million sequentially.
The impact of lower sales in the quarter was partially offset by the reduction in operating expenses resulting in an operating loss in the quarter of $140 million compared to operating earnings of $11 million in the first quarter of last year.
- Total other income and expense was a net expense of $16 million. This compares to net income of $52 million last quarter, which included a gain on the sale of Embedded Communications Computing and net income of $39 million in the first quarter of last quarter due to higher levels of interest income.
- Ongoing income tax rate is 34%.
- Operating cash flow was $343 million, primarily resulting from the settlement payment to Freescale for which was taken a charge in the fourth quarter of 2007.
- Gross margin percentage for the company was essentially flat from the fourth quarter, but up from the first quarter of last year, primarily a function of overall sales mix.
To-date, $7.9 billion of total $11.5 billion of the stock repurchase authorization have been completed.
- The operating cash outflow along with share repurchases, debt retirements, acquisitions, dividends and capital expenditures resulted in a net cash balance of $3.5 billion as compared to $4.3 billion at the end of the fourth quarter.
- Cash conversion cycle at quarter end was 46 days, 10 days lower compared to the first quarter of last year, but up 13 days sequentially. This sequential was mainly attributable to higher inventory, higher receivable days due primarily to mix of businesses and sales linearity, partially offset by approved accounts payable days.
In Mobile Devices, sales were $3.3 billion on volume of 27.4 million units.
- Estimated market share was 9.5% due primarily to a decline in North America.
- The company continues to be impacted by gaps in product portfolio.
- North America was still the largest region, and accounted for 44% of total Mobile Devices sales, Latin America accounted for 25% of sales, while Asia-Pac and EMEA made up the remaining 17% and 14% respectively.
- ASP was up reflecting a higher percentage of mid to high tier product compared to the fourth quarter. Excluding highlighted items the operating loss was $347 million compared to $204 million operating loss a year ago. The operating loss increased, as a result of lower sales partially offset by lower operating expenses resulting from cost reduction actions.
- With regard to the Mobile Devices portfolio, the company began shipping six new products including the ROKR U9 multimedia device in Europe, Latin America and Asia, and the MOTO Z9 feature phone in the US. The company announced expansions to the MOTO Q Smartphone product line, which will begin to ship through several carriers during the second quarter. The company began shipping the ROKR E8 music device in Asia.
- Multi-source silicon strategy was broadened with the announcement of Qualcomm agreement in January. Design teams are currently planning and integrating T1 and Qualcomm chipsets into 2009 UMTS product portfolio.
- On software platforms, the focus for 3G UMTS devices in the mid-to-high tier will be centered on expanded use of Symbian UIQ platform. The company will utilize Linux Java on certain devices to meet 2008 customer commitments, and continue to support and invest in that platform for the longer term. In the low to mid tier devices the company will leverage P2K, a proven low cost branded services enabled platform. This will allow discontinuing investment in other low tier platform after completing some near-term customer commitments.
