Motorola Inc. cut its way into profitability in the third quarter, lopping off manufacturing, administrative and marketing as well as research and development costs to offset the negative impact of continuing year-over-year and sequential sales declines on its operations.
The communications and mobile equipment vendor reported a net profit of $12 million, or 1 cent per share, for the quarter ended Oct. 3, compared with a net loss of $397 million, or 18 cents per share, in the comparable quarter of 2008. Net sales fell 27 percent, to $5.5 billion, from $7.5 billion in the year-ago quarter and essentially flat with the $5.5 billion reported for the prior quarter.
Motorola's latest results benefitted from efforts by the company to pare down operating costs with most metrics showing significant improvement from the 2008 comparable quarter. Gross profit margin rose to 33.2 percent from 24.1 percent while other costs fell sharply in dollar amount but were still relatively high as a percentage of sales.
Selling, general and administrative costs, for instance, dropped to $800 million, or 14.7 percent of sales, in the latest quarter from $1.04 billion, or 14 percent of sales, in the third quarter of 2008.
The company further reduced costs in its mobile devices segment with the unit posting operating loss of $183 million for the third quarter versus operating loss of $840 million in the year-ago quarter. Operating earnings in the home and networks mobility and the enterprise mobility solutions group shrank to $199 million and $306 million, respectively, from $263 million and $403 million.
Motorola is anchoring the revival of its mobile handset division on a slate of new products it recently introduced, including the Google Android-based Smartphone being marketed as the Droid. In the third quarter, Motorola's sales of cellular handsets fell 46 percent from the year-ago quarter to $1.7 billion, giving the company a market share of 4.7 percent.
The company said it shipped 13.6 million handset units during the latest quarter, compared with 25.4 million in the third quarter of 2008 when its market share was approximately 8.4 percent.
"We delivered on our commitment to improve the financial performance of Mobile Devices and to commercially launch two Smartphones in time for the fourth- quarter holiday season," said Sanjay Jha, co-CEO of Motorola and CEO of Mobile Devices.
"The introductions of our new products powered by Android are important milestones as we begin to address the mobilization of the Internet and the growing demand for modern Smartphones. Next year, we will continue to expand our Smartphone portfolio and deliver improved financial results," Jha added.