By Hugo Miller
(Bloomberg) – Motorola Inc., the largest U.S. mobile-phone maker, fell the most in almost a year in New York trading after forecasting a surprise first-quarter loss, signaling new handsets are failing to boost sales.
The loss, excluding some costs, will be 1 cent to 3 cents a share, the company said today in a statement. Analysts predicted a profit of 3 cents, the average of estimates in a Bloomberg survey. Last quarter’s sales also missed analysts’ projections.
Motorola is trying to reverse three years of slumping sales and recapture the success it had with its 2004 Razr phone by rebuilding its handset business around Google Inc.’s Android software. While the Droid, released in November, has proven popular, Motorola lacks other hit devices to challenge Apple Inc.’s iPhone and has stopped investing in its basic phone range, said Tero Kuittinen, an analyst at MKM Partners LP.
“The Droid did have a powerful first quarter but the big problem here is they’ve deemphasized development of legacy phones and that’s coming back to haunt them,” said Kuittinen, based in Greenwich, Connecticut. He rates the stock a “sell.”
Motorola, based in Schaumburg, Illinois, fell $1.03, or 14 percent, to $6.38 at 9:41 a.m. in New York Stock Exchange composite trading. It earlier dropped as low as $6.33 for the biggest intraday decline since February 2009. The stock climbed 75 percent in 2009, its best year in a decade.
Mobile-phone sales dropped faster than overall revenue, falling 22 percent from a year earlier to $1.8 billion. Motorola shipped 12 million phones, including 2 million Web- and e-mail- equipped smartphones, compared with 19.2 million a year earlier.

‘Transition’

“We are just at the beginning of our transition to a smartphone company and we have a lot of work ahead of us,” co- Chief Executive Officer Sanjay Jha, who heads the handset unit, said on a conference call.
Nokia Oyj, the No. 1 handset maker and market leader in countries such as China, today posted sales and earnings that beat analysts’ estimates after shipping 126.9 million phones last quarter.
Motorola’s fourth-quarter net income was $142 million, or 6 cents a share, compared with a loss of $3.66 billion, or $1.61, a year earlier. Profit, excluding some costs, was 9 cents a share. Analysts predicted 8 cents. Sales declined 20 percent to $5.72 billion, missing the $5.96 billion analysts projected.
Motorola will introduce at least 20 new smart phones this year, one of which will be sold directly to consumers in collaboration with Google, Jha said.
Google this month started selling its own phone called the Nexus One, manufactured by Taiwan’s HTC Corp. and sold at Google’s online store.

Handset Spinoff

Motorola plans to revive the handset unit’s profitability and then split it off from the company’s other divisions, which make set-top boxes, two-way radios and retail scanners and account for about two-thirds of revenue.
The company is moving “full steam ahead” with the split, co-CEO Greg Brown said on today’s call. Its timing will depend on the recovery of the phone business, the strength of the handset market and the economy, Brown said. Brown and Jha declined to estimate when the split may happen.
The company decided to pursue the mobile-phone spinoff almost two years ago, only to postpone the move amid a deepening recession. The phone division will be profitable in the fourth quarter, Jha said today.
Sales at the enterprise mobility unit, which makes walkie- talkies, fell 12 percent to $2 billion. The home and networks unit, which produces TV set-top boxes, posted a 24 percent decline in sales to $2 billion.

(Motorola held a conference call at 8 a.m. New York time to discuss the results. For a replay, go to {LIVE }.)

–Editors: Ville Heiskanen, Andrew Dunn

To contact the reporter on this story: Hugo Miller in Toronto at +1-416-203-5724 or hugomiller@bloomberg.net

To contact the editor responsible for this story: Julie Alnwick at +1-212-617-8960 or jalnwick@bloomberg.net

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