motorola inc. has announced preliminary Q2 estimates that show damage done by its struggling mobile devices business.
The company now expects sales to be in the range of US$8.6 billion to US$8.7 billion, down from previously estimates for sales essentially flat with Q1 sales of US$9.4 billion.
The company expects a Q2 GAAP loss per share from continuing operations in the range of 2 cents to 4 cents, including estimated net charges of 3 cents to 4 cents per share, in part related to its previously announced 7,500 job cuts, for the first part of which it now faces a US$101 million charge with more charges expected in 2007.
Motorola is attributing the sales shortfall to lower overall unit volumes in the mobile devices business in Asia and Europe. Overall, the company expects Q2 mobile devices shipments to be 35 million to 36 million handsets. Without releasing specific details, Motorola further said its mobile devices business is expected to have a larger operating loss in the quarter as compared to Q1, in which the unit showed an operating loss of US$231 million.
While the company said it no longer expects the mobile devices business to be profitable for the full year, Q2 results for the connected home solutions and networks and enterprise businesses continue to meet expectations.
The discouraging mobile device business news does not come as a surprise. Indeed, Q2 is the second continuous quarter for which the company has downgraded estimates on poor performance in the segment.
In March, the company downgraded Q1 expectations on lower than anticipated sales and operating earnings in its mobile devices business, and at that time made significant changes to company management including a new president and CFO to regain profitability.
Motorola CEO Ed Zander in April referred to the company’s Q1 mobile device business as “unacceptable,” when Motorola reported weak Q1 sales, down more than 20% from Q4 2006 and down nearly 6% year-over-year, in large part due to the mobile devices business.
The company has taken steps to change the business’ direction announcing that Stu Reed, executive VP of Motorola’s integrated supply chain organisation and a former IBM executive, has been named president of the mobile devices business. Reed replaces Ron Garriques, who resigned in February and now holds a position at Dell Inc.
“During the past two years at Motorola, Stu has established our global supply chain organisation and transformed it into a competitive advantage. Stu has extensive operational experience with the mobile device business, and he offers the best combination of leadership, strategic thinking and values to succeed in this demanding role,” said Greg Brown, president and COO.
“We are confident that under Stu’s leadership, and together with our ongoing efforts to improve the operations and execution in the mobile devices business, we can restore the profitability and performance of this important business.”