By Maisie Ramsay
Monday, February 2, 2009
Analysts expect Motorola to post grim fourth-quarter results Tuesday on losses in its handset division, causing some to speculate that the company may restructure or sell off the segment in late 2009 after postponing the spinoff last spring.
“We observe that the sharp cost-reduction measures gutting product development and sales/marketing are now threatening the long-term viability of Motorola’s handset operations,” report analysts Tero Kuittinen and Pablo Perez-Fernandez of Global Crown Capital Equity Research in a report.
“[Moderate] margin erosion of the most stable divisions of Motorola combined with the tailspin of the handset unit puts the company in a precarious position. We find it likely that the mobile phone business can be neither rescued nor spun off, leaving Motorola in a difficult bind,” say Kuittinen and Perez-Fernandez.
Many analysts expect the third-largest manufacturer of wireless handsets to post a one-cent per share loss for the fourth quarter, with some more optimistic analysts expecting the company to post earnings of zero cents per share.
Citing the company’s cancellation of the new version of its RAZR phone and the release of a camera phone that lacked 3G support, Kuittinen says that the company seems to have trouble getting a lot of new features in the same models. “Operators are anxious about that because consumers expect phones to have [multiple features],” he says.
Handset sales account for about 40 percent of the company’s revenue, with the remainder coming from infrastructure equipment and its mobility division. However, the company’s relationships with operators have been reportedly strained after it missed a series of deadlines for new models and product launches have disappointed consumers.
The company announced last March that it planned to spin off its handset business, but later postponed the deal without setting a new target date.