Motorola: Not a Bet We're Lining Up To Make

Motorola released earnings this morning.

• Sales of $9.4 billion* GAAP net loss from continuing operations of $0.09 per share, including net charges of $0.11 per share.

In our preview of the report we said “They already preannounced, so the guidance is the important bit. Numbers have come down dramatically but may have further yet to go.” The consensus for next quarter, at the time, was $0.08 on $10 billion in revenue. Motorola’s new guidance:

The company’s second-quarter outlook for sales is essentially flat with first quarter 2007. The outlook for earnings per share in the second quarter is in the range of $.02 to $.03. This outlook excludes any reorganization of business charges associated with the company’s operating expense reduction initiatives, as well as any other items of the variety highlighted by the company in its quarterly earnings releases.

If they miss they can always find a few items of some variety to explain it away. The good news is, management says “In the Mobile Devices business, we are very focused on improving operating cash flow and profitability.” The bad news is, that statement implies that for some reason they weren’t focused on operating cash flow and profitability before. Not what shareholders typically expect from their representatives in management.

Given that apparent lack of focus, operational results were dismal. Despite declining sales both sequentially and year/year the company managed to end the quarter with higher inventory than when it began. That, in turn, sounds like a recipe for further discounting and more trouble for the entire wireless sector.

The stock is up a bit this morning, perhaps enjoying a relief rally. But at 38x the too-high estimates for 2007 and 18x the estimates for 2008, which may or may not actually see a recovery, it’s not a bet we’re lining up to make.

MOT 1-yr chart: