This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Motorola Inc. (MOT) on January 23, 2008.
Management:
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Corporate Vice President of Investor Relations: Dean Lindroth
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Chief Executive Officer: Greg Brown
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Acting Chief Financial Officer: Tom Meredith
Key Investors Issues
- Sales dropped 18% to $9.65 billion.
- The loss position improved to $100 million or 5 cents a share.
- The firm used $557 million to repurchase 33.7 million shares at an average cost of $16.49 per share.
Full Year Highlights:
- The firm realised a loss of $49 million or 5 cents a share from a profit of $3.7 billion or $1.30 a share in the prior year.
- Sales were $36.6 billion, down 15% compared to last year.
- To date, $7.7 billion of the total $11.5 billion in stock share repurchase authorizations have been completed.
Fourth Quarter Highlights
Sales were $9.65 billion, down 18% from $11.8 billion in the prior year due to weak performance in the Mobile Devices business.
- The loss amounted to $100 million or 5 cents per share, an 84% improvement from $623 million or 21 cents a share in the prior year including a $276 million charge related to an agreement reached with Freescale.
- In addition, the firm took charges of $93 million related to the previously announced workforce reduction and $31 million for write-down of certain assets.
- Gross margin percentage for the company was essentially flat, and operating expenses as a percent of sales improved and along with higher sales, resulted in an operating profit of $381 million, up from $169 million reported last quarter.
The increase was primarily due to a pre-tax gain on the sale of embedded communications computing.
- Operating cash flow was $470 million in the quarter and positive in all three business segments, reflecting significant improvement in the cash conversion cycle in the quarter with net cash of $4.3 billion, up slightly from last quarter.
- The firm used $557 million, up from $118 million last quarter to repurchase 33.7 million shares at an average cost of $16.49 per share.
- The cash conversion cycle at quarter end was 33 days compared 43 days in the prior period as receivables improved by three days, inventory improved by six days, and accounts payable improved by one day.
Operational Highlights:
- There was solid sales performance in sequentially higher operating margins in the Home and Networks Mobility and Enterprise Mobility Solutions businesses.
- In addition, the firm reduced the operating loss in Mobile Devices, and operating cash flow was positive with a 10-day improvement in cash conversion cycle.
- Despite these results, challenges still exist primarily in Mobile Devices, and these include demand for some of the products has float in intensified competitive landscape.
- Consistency in new product introduction is still not where it needs to be, and the firm still has gaps in the portfolio in areas that are experiencing high rates of growth, including 3G, China and other emerging markets.
Focus is on aggressively rationalizing the cost structure with a particular emphasis on Mobile Devices and the corporate G&A, and enhancing the Mobile Devices product portfolio and delivering a consistent and timely stream of innovative products.
- The firm is intent on transitioning to software and silicon that enables lower cost, faster time-to-market and richer consumer experiences, developing a broader 3G product line and expanding 2G.
- This includes low-tier devices around the new silicon architecture through ODM solutions, and introducing more products like the E8 music device that demonstrate unique experiences, innovation and design.
- An agreement was reached with QUALCOMM to extent the relationship to include UMTS chipsets.
- Another agreement was reached with Freescale that provides the firm with greater flexibility, and will be taking incremental cost action that will result in savings of $500 million.
Business Highlights:
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In Mobile Devices, sales were $4.8 billion on volume of 41 million units giving a market share in the quarter was 12.4%.
- Excluding highlighted items, the operating loss was $82 million compared to the $138 million loss in the prior period.
- North America and Latin America, the strongest markets, accounted for 53% and 20% of sales, respectively.
- EMEA and Asia-Pac represented 15% and 12% of sales respectively and remain challenged due largely to the product portfolio, particularly in Europe and Asia.
Priorities in product portfolio enhancement efforts have remained software and silicon initiatives, which will enable a broader portfolio of innovative and lower cost devices.
- The firm intends to design Qualcomm chipsets into the UMTS handset portfolio, and TI will also be a key supplier of chipsets for UMTS devices in addition to their current significant supply role in the GSM products.
- Freescale will continue to be an important supplier for both GSM and UMTS chipsets.
- Increased flexibility across multiple silicon providers will enable the firm to bring the market a broader range of devices at lower cost.
- The transition to having more devices with more cost competitive software platforms and chipset designs is underway.
