On July 19, cell phone and communications equipment maker Motorola (NYSE:MOT) released second-quarter earnings for the period ended June 30.

•  Total revenue was down 19%, particularly because of 40% declines in the mobile devices segment.

•  Earnings and free cash flow swung from positive to negative.

•  The quarter has the Fool's Anders Bylund scratching his head about possible solutions to this mediocrity.

•  Our Motley Fool CAPS investors are equally unimpressed, collectively giving the stock a two-star rating.

(Figures in millions, except per-share data.)

Income Statement Highlights

Q2 2007

Q2 2006

Change

Sales

$8,732.0

$10,820.0

(19.3%)

Net Profit*

($38.0)

$1,349.0

N/A

EPS

($0.02)

$0.54

N/A

Diluted Shares

2,296.3

2,464.4

(6.8%)

*Includes income from continuing operations.

Get back to basics with the income statement.

Margin Checkup

Q2 2007

Q2 2006

Change*

Gross Margin

28.1%

31%

(2.9)

Operating Margin

(1.8%)

14.1%

(15.9)

Net Margin

(0.4%)

12.5%

(12.9)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q2 2007

Q2 2006

Change

Cash + ST Invest.

$3,833.0

$3,589.0

6.8%

Accounts Rec.

$5,492.0

$6,420.0

(14.5%)

Inventory

$3,016.0

$2,716.0

11%

Liabilities

Q2 2007

Q2 2006

Change

Accounts Payable

$3,493.0

$4,134.0

(15.5%)

Long-Term Debt

$2,590.0

$3,758.0

(31.1%)

The balance sheet reflects the company's health.

Cash Flow Highlights

YTD 2007

YTD 2006

Change

Cash From Ops.

($27.0)

$1,199.0

N/A

Capital Expenditures

$270.0

$249.0

8.4%

Free Cash Flow

($297.0)

$950.0

N/A

Free cash flow is a Fool's best friend.

Related Foolishness:

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