Motorola Q2 net rises on higher margins

Motorola Inc. recorded better-than-expected net profits in the second quarter despite a slight decline in revenue as margins improved on tighter cost management at the networking and mobile handset equipment manufacturer.

The company posted net income of $162 million, or 7 cents per share, for the quarter ended July 3, compared with profits of $26 million, or 1 cent per share, in the year-ago quarter. Sales fell slightly, down about 1 percent, to $5.4 billion from $5.4 billion, largely on continuing erosion in the mobile handset division where revenue dropped 6 percent to $1.7 billion.

Motorola exceeded analysts’ profit and revenue expectations during the quarter and its overall financial and market position improved moderately with cash rising amid better prospects for revival at its handset division, which has seen positive reception of its latest products, including the Droid X. Boosted by a $228 million “legal settlement”, the unit posted operating earnings of $87 million during the quarter compared with operating loss of $287 million in the comparable quarter of 2009.

“The Droid X launch has been very well received and is seen as one of the best smartphones in the market today.  As we continue to execute on our business strategy, we are in a strong position to continue improving our share in the rapidly growing smartphone market and improving our operating performance," said Sanjay Jha, Motorola co-CEOand head of the handset business. "The mobile devices and home businesses remain focused on developing next-generation products to capitalize on the convergence of mobile experiences and home entertainment.”

Motorola closed the recent quarter with gross profit margins of 37 percent, up from 31 percent in the second quarter of 2009. The company said its net cash position rose to $4.9 billion from $4.6 billion even after it spent $500 million to buy back long-term debt.

The company continues to face sales pressures, however, with revenue in the home division dropping 13 percent from the year-ago quarter, to $886 million. Revenue in the networks business declined 2 percent to $967 million while sales in the enterprise mobility unit rose 10 percent to $1.9 billion, making it the company’s biggest revenue generator. Motorola has agreed to sell the bulk of its networks business to Nokia Siemens Networks.