CHICAGO: Motorola Inc, the world's second largest wireless phone maker, said on Wednesday its second-quarter operating profits nearly doubled, amid improved handset margins and strong sales in the network systems segment.
Motorola said second-quarter earnings from ongoing operations were US$515 million, or 23 cents a share excluding special items, up 91 per cent from US$269 million, or a split-adjusted 13 cents a share, last year.
Operating profit margin in the handset unit recovered to 4 per cent of sales versus 2 per cent of sales in the first quarter this year and was about equal to the year-ago profit margin.
"I was very surprised that operating margins for phones was at 4 per cent. That's what everybody was keying in on this quarter. We were looking at 3.2, so 4 per cent is excellent," said Chase analyst Ed Snyder.
Overall earnings for the quarter, including special items, were US$204 million, or 9 cents per share, compared with US$255 million, or 12 cents a share a year ago. Sales climbed to US$9.3 billion from US$7.6 billion a year ago.
Ahead of the news, shares in Motorola rose 2-1/8 to close at 35-7/16 in New York Stock Exchange trading. In after hours trading, the stock recovered to 36 after initially slipping to 33-1/16 just after the results were reported.
Analysts had expected Motorola to earn 23 cents a share in the quarter, according to market research firm First Call/Thomson Financial.
"They reported 23 cents, which was in line with expectations, and in the cell phone business they actually hit a 4 per cent margin. Some people were afraid they wouldn't come in that 3.5 to 4 per cent range," said Charles Disanza, analyst with Gerard Klauer Mattison & Co. Sales in the personal communications segment rose 20 per cent to US$3.3 billion. Operating profits increased to US$132 million, compared with US$125 million a year ago.
Better gross margins from phone products helped drive the improvement in profitability in the second quarter versus the first quarter, the company said.
Operating margins in handsets improved because Motorola discontinued some of its older, less-profitable models, analysts said.
"They got to that operating margin number by not selling some of the phones that were losing money, and that showed up on the revenue line," Snyder said.
(Xinhua)
