Motorola Inc (MOT.N) reported on Thursday its first quarterly profit in 2007 and gave an outlook that beat Wall Street expectations, in a sign the mobile phone maker has started to turn around its business.
Motorola shares rose as much as 5 percent as investors took heart from the results, even though third-quarter profit still fell 94 percent as the company lost cell phone market share to rivals Nokia (NOK1V.HE) and Samsung Electronics (005930.KS).
Analysts said the report buys some time for Chief Executive Ed Zander, who had been under pressure from activist investor Carl Icahn and other shareholders who wanted him to step down.
RBC analyst Mark Sue said the results were encouraging but noted Motorola has a lot of work to do as competition in mobile devices had intensified in the past year.
"It's stopped getting worse for Motorola," he said. "The handset division is still operating at a loss but the loss is narrowing which suggests the light at the end of the tunnel is getting a little bit brighter. It's about sustainability."
While Motorola lost market share in the Asia Pacific region, including India, it regained its lead in Latin America and kept its lead in North America, executives said.
Motorola has been losing share to leader Nokia and Samsung, which took its number-two ranking in the second quarter. It also faces competition from Apple Inc's (AAPL.O) iPhone.
Third-quarter net profit fell to $60 million, or 3 cents a share, from $968 million, or 39 cents a share, in the year-ago quarter. The profit came after two quarters of losses.
Excluding items such as charges from job cuts, Motorola's profit was 6 cents a share, ahead of the average analyst estimate of 4 cents a share, according to Reuters Estimates.
"Our third quarter can be characterized by one word, progress," Zander said on a conference call. "We also recognize there is a lot more work to be done."
Revenue fell 17 percent to $8.8 billion, in line with the average of analyst estimates, according to Reuters Estimates.
MORE PROFITS EXPECTED
Motorola forecast fourth-quarter earnings per share from continuing operations of 12 cents to 14 cents, excluding any reorganization charges or other items, compared with the average analyst forecast of 11 cents.
The company, criticized for not creating a strong successor to its flagship Razr phone, shipped 37.2 million phones in the quarter, giving it an estimated market share of 13 percent.
Jane Snorek, an analyst at First American Funds, which has Motorola shares among its $68 billion assets managed, said investors would give Zander another year as long as Motorola delivers strong new handsets.
"He has six more months to launch new phones. Nobody's going to kick anybody out before then. Then you'll give the new phones six more months," she said. "If phones get delayed again I would think the CEO would be under pressure."
Motorola's handset business posted an operating loss of $138 million compared with a profit of $843 million a year ago. Mobile phone revenue fell 36 percent to $4.5 billion.
Zander said in an interview mobile demand did not appear to be hurt by U.S. economic concerns so far this quarter. Motorola said the total mobile market tends to grow by a double-digit percentage from the third quarter to the fourth quarter.
Asked by analysts about plans for share buybacks, Motorola Chief Financial Officer Tom Meredith hinted there could be news on this in coming weeks. Motorola has about $4 billion left to spend on its roughly $11 billion buyback plan.
The company has been cutting jobs to lower costs, and ended the quarter with 67,000 employees, down from 72,000 in early 2007.
Motorola said revenue for its set-top box and network equipment unit rose 6 percent from a year ago. Its enterprise business posted a 47 percent revenue increase to $2 billion.
Shares of Motorola, which had lost almost a third of their value in the last 12 months, were up 58 cents at $19.13 in midday trade on the New York Stock Exchange.
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