Motorola Hits Rough Patch

NEW YORK (TheStreet) -- Late Friday, after the market closed, Motorola Mobility(MMI) sent out an innocuous-sounding press release with a "Business Update" in the title.

The release ended up tanking Google's(GOOG) stock by more than 4% on Monday and the sell-off continued on Tuesday, even after the market bounced out of the gates.

The reason for the sharp drop in Google was that Motorola's results were not got for the holiday quarter. Specifically , for the fourth quarter, it said:

"Motorola estimates sales of $3.4 billion with modest profitability on a non-GAAP basis. These estimates include shipments of approximately 10.5 million mobile devices, of which approximately 5.3 million were smartphones. 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 estimates sales of $900 million for the Home business in the fourth-quarter. Motorola Mobility will issue its fourth-quarter 2011 earnings results at approximately 3:00 p.m. U.S. Central Time on Thursday, January 26, 2012."

That $3.4 billion revenue target is 10% less than analysts' expectations.

This will surely impact earnings per share which consensus estimates put at 37 cents per share for the quarter.

There are several puzzling things about this announcement. First, this was supposed to be the holiday quarter that is a blockbuster for the company. Can you imagine if Apple(AAPL) pre-announced that its holiday quarter was going to be 10% less than its already conservative guidance?

It is also interesting to note how far ahead of Motorola Apple is in terms of smartphone shipments. Motorola shipped (but didn't necessarily sell -- ask Research In Motion(RIMM) about the importance of the distinction) 5.3 million smartphones last quarter. Horace Dediu at Asymco, who has consistently been one of Apple's best prognosticators, believes Apple will sell nearly 36 million iPhones this quarter (to be announced next week).

The analysts also had thought Motorola would do $3.3 billion in revenues in the first quarter. But they had also expected big things in the fourth quarter, so it's very likely that these estimates will have to drop in the coming weeks.