Motorola Rises Most in Six Months as Profit Climbs

Motorola Profit Tops Estimates on Sales of Droid Phone
A customer uses the new Motorola Inc. Droid Pro phone. Photographer: David Paul Morris/Bloomberg

Motorola Inc., the U.S. mobile-phone maker, climbed the most in six months after third-quarter earnings topped analysts’ estimates and revenue increased for the first time in almost four years.

Profit, excluding some costs, was 16 cents a share, the company said today, beating the average analyst’s estimate of 11 cents based upon a Bloomberg survey. Revenue rose to $5.8 billion from 5.4 billion, compared with the $5.66 billion estimate, the first year-over-year revenue increase since the fourth quarter of 2006.

Co-Chief Executive Officer Sanjay Jha’s focus on Google Inc.’s Android operating system is paying dividends as the software catches on with customers. This year, Android passed Apple Inc.’s iPhone to become the most popular smartphone standard among new U.S. buyers, according to Nielsen Co., helping drive sales of Motorola’s line of Droid phones.

“He bet on Android two years ago when it was still a risky platform,” said Matt Thornton, an analyst at Avian Securities LLC in Boston, who has a “neutral” rating on the stock. “He made the right choices. So far, he’s been excellent.”

Motorola, based in Schaumburg, Illinois, rose 46 cents, or 5.7 percent, to $8.55 at 10:43 a.m. on the New York Stock Exchange, after climbing as much as 7.7 percent for the largest intraday gain since Apr. 29. The stock had climbed 4.3 percent this year before today.

Motorola’s net income rose to $109 million, or 5 cents a share, from $12 million, or 1 cent a share, the company said. The adjusted per-share profit figure excludes stock-based compensation costs and the amortization of intangible assets.

Mobile-Phone Improvements

Sales from its handset business climbed 20 percent to $2 billion last quarter, helping to narrow its loss to $43 million from $216 million a year earlier. The division had an operating profit, excluding some charges, of $3 million. Motorola said it shipped 3.8 million smartphones last quarter, beating Thornton’s estimate of 3.6 million units.

Jha told analysts on a conference call that he sees overall phone shipments this year at the upper end of the company’s target of 12 million to 14 million devices.

The mobile devices business “is back in the black and well set to form an independent company” next year, said Pierre Ferragu, an analyst at Sanford C. Bernstein & Co. in London, who has an ‘outperform” rating on the stock.

Jha, hired in August 2008 to reverse a phone sales slump, has said he expects the unit to turn a profit in the fourth quarter, allowing the company to spin off the phone unit and the division that makes cable TV set-top boxes in the first quarter of 2011. Co-CEO Greg Brown said on a conference call with analysts today the company continues to plan for the separation sometime in the first quarter.

22 New Phones

“I see the job of transforming this organization is half done,” Jha told analysts on the conference call. So far, however, Jha said he feels “pretty comfortable” with the feedback from customers, noting Motorola has introduced 22 new phones this year.

As rivals including Research In Motion Ltd. prepare tablet computers to compete with Apple Inc.’s iPad, Jha said Motorola is “engaged” in the tablet space without giving details. He said it’s not clear whether Gingerbread, the latest version of the Android operating system, is the right platform for a tablet. Motorola is aiming to introduce a tablet early next year, Jha said at a conference in San Francisco in September.

Profit, excluding certain items, will be 14 cents to 16 cents a share this quarter, the company said. That compares with the average estimate of 15 cents per share, according to Bloomberg’s survey of analysts.


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