AT&T (NYSE: T ) and BellSouth's (NYSE: BLS ) recent announcement that they'll be suspending sales of the ultra-sleek RAZR phone because of technical glitches didn't stop RAZR maker Motorola (NYSE: MOT ) from touting the cell phone's success in its newest earnings conference call.
CEO Ed Zander pointed out that slick designs like RAZR have helped the company capture a coveted position among consumers: "We are more and more identified as the cool, innovative company with quality to match." As Apple has often demonstrated, the cool factor can be a definite strategic advantage in the consumer electronics market.
In its mobile devices segment, which composes 63.9% of net sales, the company increased its global market share to 21% in the first quarter. It's the first quarter in seven years where Motorola has achieved more than a 20% share of that market. For the period, total revenues in this segment increased a staggering 45%, fueled by a 61% increase in units shipped. "We anticipate that none of our competitors are close to this kind of performance," Zander added.
The high growth hasn't hampered profitability. When one analyst asked management about the competitive environment in emerging markets, Ron Garriques, Motorola's president of Mobile Devices, stated that the strength of the company's product lineup allows it to keep prices strong in these areas. Repeated price cuts from competitors have had little effect on Motorola's emerging-market business, Garriques said. Operating margins for mobile devices increased 10 percentage points, to 11%, in Q1. In the second quarter, the company expects further improvements over its year-ago operating margins.
Motorola wasn't so successful in other areas. Revenues in its networks segment dropped 14% year over year, largely because of poor results in China, which the company attributed to uncertainties in 3G licensing. In the next quarter, management expects sales in this segment to stabilize, though operating margins will remain weaker. Additionally, stock options will continue to weigh upon Motorola's bottom line; they drained $0.02 per share from earnings in the recent quarter, and the company expects that they'll exact a similar cost in Q2.
Clearly, Motorola has some wrinkles to iron out in the networks market. Fools should keep an eye on whether its strength in its core business will be enough to offset these other challenges going forward. Motorola believes it's well-positioned to continue increasing its market share and operating margins in the handset market. Now, if it can just figure out the networking biz ...
Dial up related Foolishness:
- Will slimmer phones mean fatter margins for Nokia (NYSE: NOK ) ?
- Verizon (NYSE: VZ ) goes for new viewers by inking deal with CBS (NYSE: CBS ) .
- Time Warner (NYSE: TWX ) is getting into the wireless act.