Motorola predicts plummeting profits

Motorola expects to post a quarterly financial loss

Motorola has warned that sales and profits will fall short of projections ahead of its second quarter financial results, and says it does not expect its mobile device business to be profitable this year.

The number two mobile phone maker expects second-quarter sales to be $8.6bn to $8.7bn - short of the $9.4bn predicted earlier - and expects to post a loss of two to four cents a share when results are announced next Thursday, compared to a previous guidance of a profit of two cents per share.

The firm blamed the shortfall in sales and earnings on poor sales in Asia and Europe, and it expects second-quarter shipments to be between 35 to 36 million handsets, down 32 per cent over the year.

The bad news about the mobile devices business was countered by predictions that its connected home products and network and enterprise business will meet expectations.

Martin Garner, director of wireless intelligence at analyst Ovum, says the steep fall at Motorola is ‘scary’ and that the biggest problem is the product portfolio.

‘It is under siege in all segments across the world. One aspect of that is that Motorola has had a rather US-centric view of what its portfolio should look like - fine for selling in the US, but not fine elsewhere,’ he said.

Ovum does not believe that Motorola can easily fix its portfolio problem, despite new leadership from Stu Reed, and will continue its downward spiral unless it comes up with some excellent new products in the next few months.

Ed Zander, chief executive of Motorola, will come under increasing pressure, says analyst Gartner.

He has not been helped by a $100m charge this year for redundancies of more than 10 per cent of the workforce, and the analyst predicts further redundancies if its expectation that Motorola is overtaken by Samsung and Sony Ericsson materialises this year.