Motorola Has Its Hands Full

For Somaney's preview heading into the Motorola conference call, please click here.

Motorola (MOT - commentary - Cramer's Take) reported a mixed bag set of numbers this morning. The company reported revenue of $5.37 billion, which was below expectations, and a loss of 10 cents per share, which beat expectations. The Street was at $5.55 billion in revenue, with a loss of 11 cents per share.

The company sold 14.7 million phones for the three months ended March 31, which was below consensus of 15 million. Management said that it is focused on cost cuts and raised its cost-savings target for 2009 to $1.7 billion, up from the $1.5 billion to which it had previously guided. The company said that $1.3 billion worth of savings will come from the cell phone unit. Motorola also said it will be cash flow positive in the second half of this year.

Samsung and Nokia (NOK - commentary - Cramer's Take) are Motorola's biggest competitors, and their aggressive pricing and better-received handset units are giving Motorola nightmares at present. It was not just the cell phone unit giving Motorola problems, its home networks and enterprise units also performed worse than expected. Home networks sales were down 16%, and earnings were down 25%. The enterprise unit was down 11%, and profitability was off 37%. Motorola has its hands full at the moment, but management stated that it is focused on cost-cutting, improving the bottom line and improving its working capital, which will turn the ship around.

The company has wagered a lot of money and resources on Android power phones, which is Google's (GOOG - commentary - Cramer's Take) mobile operating system, but the company admitted that those Android-based models would not come till year-end. As a result, Motorola is forced to cut costs via layoffs, reducing its dividend and canceling several planned products in an effort to strengthen its balance sheets.

CEO Sanjay Jha said that the new Android-based phones will address the mid- to high-end markets and will be launched by multiple carrier partners across many countries. He declined to provide any details. The company's current market share has dropped to 6% globally, about half the level it was at a year ago.

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At the time of publication, Somaney was long Google calls, although positions may change at any time without notice.

Jay Somaney is a partner and fund manager with TSG Capital Partners, a hedge fund based in Plano, Texas, and founder of GlobalTechStocks.com, a subscription site that focuses on technology and Indian stocks (including ADRs), providing information, news and chatter. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Somaney appreciates your feedback; click here to send him an email.