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Motorola devices unit posts long-due profit

Thu, 10/28/2010 - 8:20am
Maisie Ramsay, Wireless Week

Motorola's handset unit posted its first profit in more than three years on the continuing success of its Android devices, the company reported in its third-quarter earnings today.

The company's mobile device segment posted non-GAAP (generally accepted accounting principles) operating earnings of $3 million in the third quarter. The unit lost $43 million on a GAAP basis, which includes expenses related to stock-based compensation, intangible amortization and reorganization charges.

Motorola Mobility CEO Sanjay Jha said the Droid X continued to sell "extremely well" and reported in the company's earnings call that smartphone sales drove the average selling price of its handsets to $223, from $207 in the second quarter of this year.

The unit shipped 9.1 million handsets and 3.8 million smartphones in the third quarter, bringing in sales of $2 billion. Motorola has introduced 22 new smartphones since the beginning of the year.

Jha said smartphones continue to account for more than half of Motorola's total handset sales and emphasized that Motorola was moving to diversify its handset lineup both in U.S. markets and overseas. The company's Droid franchise with Verizon Wireless is crucial to its handset revenues, and Jha gave indications the company would look beyond Verizon for growth in the upcoming quarters.

"Clearly, we have a North American bias to our sales focus, and we're looking to diversify both within the U.S. and outside the U.S.," Jha said.

Looking ahead, Jha said Motorola would focus its handset efforts on high-end phones, mass-market devices of the sort released at CTIA earlier this month, and enterprise-grade smartphones for business users, like the Droid Pro.

He also hinted the company was considering entering the tablet market, saying that the introduction of tablets could drive up the company's average selling price.

Jha's comments come as Motorola prepares to split itself into two independent companies in the first quarter of next year. The company's handset division has struggled to achieve profitability, and Jha sought to reassure investors, saying he saw "no reason for us not to get to industry-standard profitability."

Overall, Motorola made $7 million from continuing operations, with net earnings reported as $109 million, on $5.8 billion in sales from both combined and discontinued operations. Motorola's networks business was excluded from some of its results as "discontinued operations" because of the division's pending sale to Nokia Siemens Networks.
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