Motorola Inc. posted a surprising net profit in the second quarter on improving margins and lower costs even as sales continued to tumble and the company's share of the wireless handset market shrank to less than six percent.
The company reported net income of $26 million, or 1 cent per share, for the three months ended July 4, compared with net profit of $4 million in the second quarter of 2008 and net loss of $231 million in the first quarter of this year. Revenue fell to $5.5 billion, up slightly from $5.4 billion in the first quarter but down 32 percent from $8.1 billion in the year-ago quarter.
Motorola benefitted from lower costs during the just ended quarter with selling, general and administrative expenses falling to $822 million compared with $1.1 billion in the second quarter of 2008 and $869 million in the first quarter. Research and development costs also continued to fall, dropping in the second quarter to $775 million from $1.1 billion in the comparable 2008 period.
As a percentage of sales, SG&A as well as R&D expenses remain stubbornly high, hovering around the 14 to 15 percent mark, down from approximately 13 to 14 percent in the year-ago quarter.
"We further reduced our cost structure, improved our operating margins and decreased inventory on a sequential basis," said Greg Brown, co-CEO of Motorola in a statement. "We also continued to focus our R&D efforts on innovation in areas such as next-generation public safety, enterprise mobile computing, enhanced broadband video and 4G wireless."
The company is far from being out of the woods, however. Sales in the mobile handset division lags the performance of other industry players and Motorola estimated its share of the market fell to 5.5 percent in the recently ended quarter on shipment of 14.8 million handsets versus 28.1 million units in the second quarter of 2008.
Motorola said the company is getting ready a slate of mobile devices for the end-of-year and holiday selling season. The division's operating loss fell 50 percent on a sequential basis, the company said, while sales declined 45 percent.
"We are also excited about our 2010 portfolio and are pleased with the customer feedback," said Sanjay Jha, co-CEO of Motorola and head of the mobile division. "In mobile devices, we improved the operating loss, reflecting a lower cost structure and substantially reduced cash consumption as compared to the first quarter."