Motorola Q1 2010 Earnings Call Transcript

Motorola Q1 2010 Earnings Call Transcript
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Motorola (MOT)

Q1 2010 Earnings Call

April 29, 2010 8:00 am ET

Executives

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Gregory Brown - Co-Chief Executive Officer, President, Executive Director, Co-Chairman of Executive Committee and Chief Executive Officer of Enterprise Mobility Solutions & Networks Businesses

Sanjay Jha - Co-Chief Executive Officer, Director, Co-Chairman of Executive Committee and Chief Executive Officer of Mobile Devices & Home Businesses

Edward Fitzpatrick - Chief Financial Officer and Senior Vice President

Dean Lindroth - Corporate VP of IR

Analysts

Brian Modoff - Deutsche Bank AG

Tim Long - BMO Capital Markets U.S.

Mark Sue - RBC Capital Markets Corporation

Edward Snyder - Charter Equity Research

Kulbinder Garcha - Crédit Suisse First Boston, Inc.

Phil Cusick - Macquarie Research

Jeffrey Kvaal - Barclays Capital

Ehud Gelblum - Morgan Stanley

Pierre Ferragu - Sanford C. Bernstein & Co., Inc.

Tal Liani - BofA Merrill Lynch

Ittai Kidron - Oppenheimer & Co. Inc.

Simona Jankowski - Goldman Sachs Group Inc.

Maynard Um - UBS Investment Bank

Presentation

Operator

Good morning, and thank you for holding. Welcome to Motorola's First Quarter 2010 Earnings Conference Call. [Operator Instructions] The presentation material and additional financial tables are currently posted on Motorola's Investor Relations website. In addition, a replay of this call will be available approximately three hours after the conclusion of this call, over the Internet, through Motorola's Investor Relations website. The website address is www.motorola.com/investor. [Operator Instructions] I would now like to introduce Mr. Dean Lindroth, Corporate Vice President of Investor Relations. Mr. Lindroth, you may begin your conference.

Dean Lindroth

Thank you, and good morning. Welcome to Motorola's First Quarter Results Conference Call. Today's call will include prepared remarks by Greg Brown, Co-Chief Executive Officer of Motorola and CEO of Enterprise Mobility Solutions and Networks; Sanjay Jha, Co-Chief Executive Officer of Motorola and CEO of Mobile Devices and Home; and Ed Fitzpatrick, Motorola's Chief Financial Officer. A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Motorola's actual results could differ materially from these statements. Information about factors that could cause and on some cases have caused such differences, can be found in this morning's press release on Pages 17 through 29 and item 1A of Motorola's 2009 annual report on Form 10-K and on Motorola's other SEC filings. This presentation is being made on the 29th of April, 2010. The contents of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, Motorola will not be reviewing or updating the material that is contained herein.

With that, I'll now turn the call over to Greg.

Gregory Brown

Thanks, Dean, and good morning, and thank you all for joining us. This morning, Motorola reported sales in the first quarter $5 billion. On a GAAP basis, we earned $0.03 per share from continuing operations, compared to a loss in the first quarter a year ago. Excluding highlighted items, earnings were $0.02 a share, exceeding the guidance of a loss of $0.01 to loss of $0.03 per share that we provided on our last earnings call.

Operating earnings increased substantially, reflecting year-on-year improvements in each of our businesses. We increased total cash by over $450 million and ended the quarter with total cash of $8.5 billion.

In Mobile Devices, Smartphone unit shipments increased sequentially to 2.3 million units. Our portfolio of Smartphones increased to eight, and we ship to renounce devices with all four major carriers in North America and many others around the world. In Home, while sales were lower year-on-year, operating earnings and operating margin were higher. In Enterprise Mobility Solutions, sales grew 6% year-on-year driven by a recovery in the enterprise markets, and we secured our largest ever TETRA subscriber contract in Europe. In Networks, operating margin was up substantially, and we were awarded a contract by Zain to deploy an LTE network in Saudi Arabia.

Regarding separation, we continue to make significant progress on our plan to create two independent public companies; one comprised of Mobile Devices and Home, and one comprised of Enterprise Mobility Solutions and Networks. And our target for the separation remains the first quarter of 2011.

Additionally, we recently provided revised GAAP and non-GAAP financial results for each of our businesses to give further insight into our operating results ahead of our planned separation. And beginning this quarter, Sanjay will review the operating results for Home in addition to Mobile Devices, and I’ll continue to review both Enterprise Mobility Solutions and Networks.

But now, Ed will provide additional details on our reporting changes in Motorola’s overall financial results for the quarter. So I'll now turn it over to Ed Fitzpatrick.

Edward Fitzpatrick

Thanks, Greg. I'll begin today by outlining the three changes we had made to our financial reporting. First, starting this quarter, we are reporting the financial results of our Home business and our Networks business at separate segments. In the past, results of these businesses were reported as a single segment. Second, stock-based compensation costs, amortization of intangibles and corporate G&A costs that were previously included in the Other and Eliminations reporting segment, are now included in the business segment results. This change impacts the GAAP results of each business segment but has no impact on Motorola's consolidated GAAP financial results. Going forward, the Other and Eliminations segment will only include eliminations of inter-segment sales, transactions and a small amount of corporate operating expenses. Third, to supplement our GAAP reported results, we’ll present operating earnings on a non-GAAP basis, excluding items we have historically highlighted, as well as stock-based compensation costs and intangible amortization expense. Going forward, our quarterly earnings guidance will also be provided in this manner.

We believe this presentation of non-GAAP earnings will provide further details and insight on our operating performance. GAAP and non-GAAP results for 2007, ‘08 and ‘09 and this revised presentation format can be found on our website. Shortly after we file our first quarter 10-Q, we plan to file an 8-K, which will include revised 2009 10-K footnotes, which reflect the new segment presentation and the allocation of certain corporate costs to the segments.

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