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Motorola Posts Wider Loss as Phone Shipments Decline (Update2)

By Ville Heiskanen

April 24 (Bloomberg) -- Motorola Inc. posted a wider first- quarter loss and gave a forecast that fell short of analysts' projections, hurt by a lack of new mobile phones to compete with Apple Inc. and Nokia Oyj.

The stock dropped 4.2 percent in early trading after Motorola, the largest U.S. mobile-phone maker, said its net loss expanded to $194 million, or 9 cents a share. Revenue fell to its lowest level in four years, trailing estimates.

Phone shipments plunged 40 percent as the Razr 2 and Z8 failed to keep buyers away from Apple's iPhone and Samsung Electronics Co.'s BlackJack. Chief Executive Officer Greg Brown, bowing to pressure from investor Carl Icahn, decided last month to spin the handset unit off to focus on faster-growing businesses, such as wireless networking equipment.

``There's no part of this company that's really doing very well,'' Joan Lappin, president of Gramercy Capital Management in New York, said in an interview with Bloomberg Radio. ``This was a company with one of the great American brand names. There's just nothing special going on there any more.'' Lappin sold Motorola shares in 2006.

The stock dropped 40 cents to $9.15 in trading before U.S. exchanges opened after closing at $9.55 yesterday on the New York Stock Exchange. Schaumburg, Illinois-based Motorola had dropped 40 percent this year before today.

The company forecast a second-quarter loss, excluding costs for job cuts, of 2 cents to 4 cents a share, falling short of analysts' projections for a break-even quarter.

Trailing Sales

First-quarter revenue declined 21 percent to $7.45 billion, trailing the $7.79 billion average of estimates compiled by Bloomberg. Shipments fell to 27.4 million units, compared with the 34 million estimate of Morgan Keegan & Co. analyst Tavis McCourt in Nashville, Tennessee.

``We knew it would be weak, but the degree of weakness in mobile phones was surprising,'' McCourt said. He advises investors to hang on to the shares.

Profit at the division that sells wireless network equipment and set-top boxes also slumped, dropping 8.4 percent in the first quarter to $153 million. Sales advanced 2 percent to $2.4 billion, slower than the previous quarter's 11 percent pace.

Revenue growth at the division selling two-way radios for police departments and emergency personnel, scanners for retailers and network gear for businesses also slowed, to 5 percent from 35 percent in the previous quarter.

Loss Expands

The mobile-phone division's loss widened to $418 million from $233 million a year earlier. The unit has lost more than $1.5 billion since the start of 2007 as consumers snapped up rival devices that play music, surf the Web and capture video. That prompted former chief Ed Zander to step down in November, leaving the company in Brown's hands.

Zander revived Motorola with the Razr, only to see its cachet fade amid gains by Nokia and Apple. The Razr 2, introduced last year, has failed to match the success of its predecessor, which sold more than 110 million units since its introduction in 2004.

Motorola's share of global phone sales fell to 11.9 percent in the fourth quarter from 21.5 percent a year earlier, according to Stamford, Connecticut-based researcher Gartner Inc. Nokia boosted its share to 40.4 percent, and Samsung lifted its share to 13.4 percent.

To prevent Motorola from slipping further, Brown, 47, this month started selling the Z9 with satellite navigation. He is also planning to start sales of the Rokr E8, which holds about 5,000 songs and includes a camera.

Excluding costs for job cuts, the first-quarter loss was 5 cents, Motorola said. Analysts on average projected a loss of 6 cents, according to a Bloomberg survey. A year ago, the net loss was $181 million, or 8 cents, the company said today in a statement.

Motorola started eliminating jobs last year to revive profit. This month, the company said its latest cut of 2,600 positions cost $104 million in pretax expenses in the first quarter.




To contact the reporter on this story:
[bn:PRSN=1] Ville Heiskanen [] in New York at
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Last Updated: April 24, 2008 08:04 EDT