Motorola 1st quarter results 2006

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Desite some financial analysts believing Motorola's numbers would exceed the company’s own projections and those of Wall Street made in the fourth quarter of 2005 jumping on the popularity of the the Razr and more.

Motorola’s handset business accounted for nearly two-thirds the company’s revenue in the fourth quarter and those results are expected to carry the company, while analysts expect more modest results from the company’s network infrastructure division, its connected home solutions and government and enterprise mobility offerings. Alcatel’s pending acquisition of Lucent, driven by the shrinking value of the network business, has fueled speculation that Motorola may acquire another player to remain competitive in that sector.

Motorola reported robust sales of its wireless handsets in the first quarter and a nearly 5-percent gain in global market share over the year-ago quarter to 21 percent. The company’s positive handset news confirmed that it had achieved its stated ambition to close the market-share gap with rival and market leader Nokia Corp.

Nonetheless, Motorola’s good news was overshadowed by a drop in overall earnings, caused in part by lackluster results in the company’s network business and, perhaps ironically, dogged by the robust handset sales led by the company’s mega-hit Razr phone. Despite record-setting first-quarter sales in handsets, the company reported a decrease in net earnings to $686 million from $692 million in the year-ago quarter. Asked what Motorola’s follow-up act to the Razr would be, Chief Executive Officer Ed Zander said, “Razr Part II,” though it wasn’t immediately clear whether he meant tweaks to the Razr, or referred to the Razr as the slim phone design that would govern succeeding models such as the just-released Slvr model.

Industry analysts are concerned that despite the Razr’s long-lived sales two years after its release, the handsets’ sales are likely to wane, placing pressure on Motorola to produce another mega-hit handset model. Milking the Razr’s popularity by tweaking its features or colors to continue its sales success may make sense in the short-term, but the strategy risks lowering the company’s profit margins as the handset is increasingly subsidized by carriers in the United States and Motorola pursues an increase in unit volume in ultra low-cost handsets with slim margins in emerging markets.