Supported by strong sales of its newly launched 3G Android-based smartphones, Motorola Inc. (MOT) today declared an unexpected profit for the first quarter 2010.
Quarterly net income was $69 million or 3 cents per share, compared to a net loss of $291 million or 13 cents per share in the prior-year quarter. First quarter adjusted (excluding special items and amortization of intangible assets) EPS was 4 cents, easily beating the Zacks Consensus Estimate of net a loss of 1 cent. Improvement in net income was primarily due to the huge reduction in operating expenditures.
Quarterly total revenue was $5,044 million, down 6.1% year-over-year and also below the Zacks Consensus Estimate of $5,121 million.
Gross margin in the first quarter was 35.4%, compared to 27.9% in the prior-year quarter. Quarterly operating expenditure was $1.71 billion compared to $1.95 billion in the year-ago quarter. Quarterly operating margin was 1.5% compared to a negative 8.4% in the year-ago quarter.
During the first quarter 2010, Motorola generated $485 million of cash from operations, compared to cash consumption of $1,014 million in the prior-year quarter. Free cash flow (cash flow from operations less capital expenditure) in the same quarter was $415 million, compared to a negative $1,085 million in the year-ago quarter.
Cash, cash equivalents, & marketable securities at the end of the first quarter 2010 were approximately $8.9 billion, compared to $8.5 billion at the end of fiscal 2009. Total debt at the end of the first quarter 2010 was $3.9 billion, the same as at the end of fiscal 2009.
Mobile Devices Division
Quarterly revenue was $1,641 million, down 9% year-over-year. Operating loss was $192 million, a significant reduction from an operating loss of $545 million in the year-ago quarter.
During the reported quarter, Motorola shipped 8.5 million mobile phones, including 2.3 million smartphones. This is a considerable improvement over the 2 million smartphones shipped in the previous quarter. During the first quarter, the company launched 6 new 3G smartphones; all are based on Google Inc’s (GOOG) Android operating system.
Home Division
Quarterly revenue was $838 million, down 18% year-over-year. Operating income was $20 million compared to an operating income of a mere $3 million in the year-ago quarter. During the first quarter, Motorola shipped 3.1 million digital entertainment devices.
Enterprise Mobility Solutions Division
Quarterly revenue was $1,694 million, up 6% year-over-year. Operating income was $141 million, compared to an operating income of just $66 million in the year-ago quarter. During the first quarter, Motorola won one of the single largest TETRA terminal contracts ever awarded in Europe, including more than 50,000 terminals, from the German Federal Ministry of Interior.
Networks Solutions Division
Quarterly revenue was $896 million, down 7% year-over-year. Operating income was $112 million, compared to an operating income of $62 million in the year-ago quarter. During the first quarter, Motorola entered into agreement with Zain for the first LTE network deployment in Saudi Arabia.
Future Financial Outlook
Management provided guidance that the company’s GAAP EPS from continuing operations is expected to be in the range of 7 cents to 9 cents in the second quarter 2010.
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