Motorola Mobility says the cost of defending itself against patent lawsuits and steep competition in the high-end smartphone market has had an impact on its fourth-quarter financial performance, with sales flat over last year and only "modest" profits.
The stagnant sales figures come as Motorola is working to close its acquisition by Google, which announced in August it was paying $12.5 billion for the handset maker.
"Motorola Mobility's fourth-quarter results were impacted by the increased competitive environment in the Mobile Device business and higher legal costs associated with ongoing intellectual property (IP) litigations," the company said in an update posted Friday.
The Libertyville, Ill.-based company has an extensive portfolio of 17,000 patents and 7,500 pending patent applications worldwide, but its substantial intellectual property holdings have not been enough to protect it from becoming embroiled in a number of expensive lawsuits with rival tech companies.
Motorola Mobility is facing numerous complaints over the patents used in its Android-based smartphones, including suits and countersuits against Microsoft and Apple.
Fourth-quarter sales are expected to come in at just $3.4 billion, the same as the previous year's results, with "modest profitability on a non-GAAP basis." The sales figures were below analysts' consensus estimate of $3.9 billion.
Overall handset shipments dipped to 10.5 million devices, from the 11.3 million it shipped during the fourth quarter of 2010. Shipments of Motorola's more lucrative smartphones rose slightly to 5.3 million, from 4.9 million in 2010. Sales in its Home unit are expected to come in at $900 million.
The news sent Motorola's stock down Friday, and the slide continued this morning, with shares down 25 cents in trading on the New York Stock Exchange.
Motorola Mobility's full financial results will be posted on Jan. 26.
Motorola said it "continues to work closely" with Google to close the buyout deal, which was overwhelmingly approved by shareholders during a November vote. The transaction has to be approved by a number of domestic and international regulators, including the Justice Department; European Commission; and antitrust agencies in Canada, China, Israel, Russia, Taiwan and Turkey.
Both the DOJ and European Commission have asked for more information about the deal, but neither regulator has said they plan to block the transaction.
Google's purchase of Motorola Mobility will give it control over a key manufacturer of smartphones using its popular Android-based operating system. The deal will also shore up Google's weak patent protection for the platform. Google has claimed that Apple and Microsoft are using aggressive lawsuits to quash the rise of its Android platform by making it more expensive for manufacturers to use the technology.