Update: Motorola Mobility posts strong Q4 but warns about Q1

In its first earnings report since becoming a standalone company, Motorola Mobility said it was profitable in the fourth quarter of 2010 and shipped more than twice as many smartphones during the quarter as it did in all of 2009.

However, the company said it expects a net loss of $26 million to $62 million for the current quarter, indicating that competition in the smartphone market continues to be heated.

That loss may come specifically from new competition from the iPhone. Motorola, which has strong sales through the Droid franchise at Verizon, said it is already suffering from competition from the Verizon iPhone, even though that phone doesn't go on sale until February.

"Since the announcement of the iPhone [on Verizon] we have seen some slowdown in our sell-through of our devices, because clearly there's an anticipation of the devices coming to Verizon," said Sanjay Jha, chairman and CEO at Motorola Mobility, during a conference call to discuss the earnings. "We have seen that even prior to the iPhone launching."

He's hopeful, though, that Verizon is committed to selling a diverse set of products and will continue to promote the Droid phones. "I'm not yet convinced that Verizon will not continue to push forward with Droid as a franchise," Jha said.

In addition, Motorola hopes to meet the new competition by diversifying in several ways, including by working more closely with other operators and by expanding its retail channels, he said. The company also hopes to step up efforts to sell more phones in markets outside of the U.S., including China and Latin America.

For the fourth quarter, net income for Motorola Mobility was $80 million, or $0.27 per share, compared with a loss of $204 million, or $0.69 per share, a year earlier. Net revenue was $3.4 billion, up 21 percent compared with the same quarter in the previous year.

Motorola Mobility, which separated from its parent company in early January, has two groups: Mobile Devices, which makes phones, and Home, which makes set-top boxes and other IPTV equipment.

Mobile devices generated net revenue of $2.4 billion, up 33 percent year over year. Operating earnings were $72 million.

Net revenue from the Home segment was $1.0 billion, up 1 percent from a year earlier, with operating earnings of $54 million.

Motorola said it shipped 4.9 million smartphones in the quarter, more than double the 2.0 million shipped for the full year of 2009. The company now exclusively uses Android to power its smartphones, a shift from its previous strategy of making devices that ran a variety of operating systems. Still, sales of phones in 2009 were particularly low because it was a transition period for the company, which struggled to come up with a new hot phone after years of relying on its Razr line.

Motorola's Droid handsets and other Android phones have been popular. The company launched seven new smartphones in the fourth quarter. It also recently announced products in new categories, including the Xoom, a tablet that will be one of the first to run Android 3.0, known as Honeycomb. Motorola also announced the Atrix, a phone that pairs with a docking station that has a monitor and keyboard but is portable like a laptop.

Jha hinted that there's a chance the launch of Xoom could be slightly delayed. "Our anticipation for the launch of Xoom continues to be in February," he said. "There might be a modest variation on that, but the anticipation is that we will launch a full, functional Xoom 3G in February."

Motorola hopes that tablets such as the Xoom will give the company one more tool to combat the iPhone. The company expects to sell a total of 20 million to 23 million devices in 2011, a figure that includes phones and tablets. Jha declined to break out how much of that total would come from tablets, because he said it's too soon to know. But he did say that in the second half, Motorola expects to launch additional tablets, including some with different form factors and sizes.

Nancy Gohring covers mobile phones and cloud computing for The IDG News Service. Follow Nancy on Twitter at @idgnancy. Nancy's e-mail address is Nancy_Gohring@idg.com

Copyright © 2011 IDG Communications, Inc.

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