This summary is based on the second quarter fiscal 2007 earnings call conducted by Motorola, Inc. (MOT) on July 19, 2007.
Management:
Chairman & CEO: Ed Zander
President & COO: Greg Brown
Chief Finance Officer: Tom Meredith
Corporate VP, IR: Dean Lindroth
Key Investors Issues
- The net loss was 2 cents per share compared to a profit of 54 cents a share in last year.
- Realignment and integration efforts are progressing well.
- MOTOwi4 portfolio received awards for innovation.
- The company concluded $7.1 billion of the $11.5 billion stock repurchase authorizations.
- Motorola plans to acquire Terayon Communication Systems and Leapstone Systems.
Fiscal Year to Date Performance
- Sales decreased by 11.2% from $20.5 billion in 2006 to $18.2 billion.
- Interest income fell by 46.7% to $73 million from $137 million in the prior year.
- The firm realised a loss of $209 million or 11 cents a share from a profit of $2.1 billion or 79 cents a share.
Second Quarter Highlights
Sales were down 19% from $10.8 billion in 2006 to $8.7 billion, following poor sales performance from Mobile Devices.
The firm did not achieve the expected level of sales and unit shipments in Mobile Devices in Asia, the Middle East and Africa while Europe continued to be a challenge. The impact of lower volume was offset through cost controls and a more favorable sales mix.
The firm realised a net loss of $28 million or 2 cents per share from a profit of $1.4 billion or 54 cents a share in the prior year.
This includes 4 cents a share related to charges associated with workforce reductions and an insurance litigation.
- Operating cash flow was a negative $35 million, as a result of the operating loss in Mobile Devices and the cash conversion cycle, following the inclusion of a $410 million collection related to Telsim.
- Net cash decreased by $300 million, sequentially to $4.3 billion, following acquisitions, capital expenditures and a dividend payout.
The company has concluded $7.1 billion of the $11.5 billion stock repurchase authorizations, with 335 million shares or 14% of the outstanding shares in May of 2005 when the first repurchase program was initiated.
- The cash conversion cycle was 50 days, up from 36 days in the prior year, as Mobile Devices ended the quarter at 49 days, Home and Networks Mobility had 50 days, and Enterprise Mobility Solutions was 53 days.
- In each of the business units, the firm is seeking ways to improve receivable terms and conditions and shorten sales outstanding.
- Such actions are expected to directly benefit the cash conversion cycle, as each day the cash conversion cycle is reduced, the firm can improve operating cash flow by $100 million, resulting in an expected addition of $2 billion in cash to the balance sheet.
Organizational Structure:
- The Connected Home Solutions business was combined with the Cellular Wireless Networks business to form Home and Networks Mobility to focus on combined wireless, wireline and cable resources on the carrier telco and cable customers.
- The enterprise businesses, Government and Public Safety and Enterprise Mobility, which includes the Symbol and Good acquisitions, will now form Enterprise Mobility Solutions.
- Rationalization of engineering, completion of the Huawei 3G partnership, ramping up WiMAX efforts in the states, especially with Clearwire and Sprint and combining certain functions expected to achieve G&A synergies.
- Key leadership changes have been effected across the firm, with Stu Reed being appointed President of Mobile Devices.
Cost Saving Initiatives:
- The firm announced workforce reduction of 7,500 and other actions resulting in a negative savings of $1 billion in 2008.
- Charges associated with 4,100 employees affected by the reduction in force have been recognized in the financials while the remaining charges are scheduled to be completed in the second half.
Performance of Business Segments
