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Motorola 1Q income down despite sales jump
CHICAGO - Motorola Inc., the world's No. 2 cell phone manufacturer, reported a slight drop in first-quarter income Tuesday despite a 23 percent jump in sales that helped it gain market share and close the gap on rival Nokia Corp. Motorola shares tumbled 5 percent in after-hours trading as investors showed their disappointment that record first-quarter sales failed to translate into higher profits. The company also disclosed 2,500 new job cuts, mostly abroad, that had not been formally announced  most of them related to the closure of two manufacturing plants in Nogales, Mexico, and Taiwan. Schaumburg-based Motorola had 69,000 employees at the start of 2006. Motorola said its market share was higher than it had been since 1999 as it rode the continued momentum of its trendy Razr line of phones and makes inroads in the fast-growing markets of Brazil, Russia, India and China. But Wall Street punished the stock because the gains came on lower average selling prices for its phones in those countries, as reflected in a 1 percent decline in operating margin in Motorola's handset business. "The company is facing a delicate balance between capturing the revenue growth in these emerging markets and keeping it up on the bottom line," said Morningstar analyst John Slack. "The market share gains were significant in the growth areas, but that's less profitable growth." Net income fell to $686 million, or 27 cents per share, from $692 million, or 28 cents per share, in the same period a year earlier when results were boosted by a substantial gain on investments. That matched the estimate of analysts surveyed by Thomson Financial, who had pegged earnings at 29 cents per share without counting stock option costs, which Motorola said amounted to 2 cents per share. Revenue jumped to a record $10 billion from $8.2 billion a year earlier, exceeding analysts' estimates by almost $500 million. Motorola said handset shipments rose 61 percent in the quarter to 46.1 million units. The company estimated its global handset market share at about 21 percent, up 4.8 percent from the first quarter of 2005. CEO Ed Zander said on a conference call that it was the first time Motorola had topped 20 percent in market share in seven years, thanks in no small part to the Razr's ongoing success. "Razr was the story again," he told analysts. "If we keep going at this rate, and we think we will, 2006 may well be the Year of the Razr, Part 2. All of you are asking 'What's after Razr?' and I say 'More Razrs.'"
