Motorola sales boost exceeds forecasts

MOTOROLA, the world’s second-biggest maker of mobile telephones, had a third-quarter net income of $116m as sales rose 5% to $6.83bn, exceeding the company’s forecasts.

Net income was 6 cents a share, compared with $111m, or 5 cents, in the year-earlier quarter, the Schaumburg, Illinois-based company said in a statement. Sales rose from $6.53bn.

Shares in the company increased by 2.5% to $14.14 after the announcement. Other US stocks also climbed after Motorola exceeded expectations amid optimism that other companies would lift profit forecasts when they reported earnings this week.

Motorola said it released results a day earlier than scheduled because its subordinated-debt rating was cut below investment grade on Friday by Moody’s Investors Service.

Motorola plans to spin off its semiconductor unit to free up money to invest in the mobile-phone business and chief executive officer Christopher Galvin is stepping down because of disagreements with board members on the company’s strategy.

Once the biggest maker of mobile-phone handsets, Motorola is trying to catch up on Finnish competitor Nokia, whose market share was more than double that of Motorola’s 14.6% in June.

“We’ve seen some slip-ups on the handset side,” said John Krause, an analyst at Thrivent Financial for Lutherans, which owned 1.96 million Motorola shares as of June 30.

“If you want the stock to work long term, you still have to execute and that’s uncertain in some cases at this point.”

Motorola shares rose 76 cents, or 5.5%, to $14.55 at 8:40am New York time in pre-market trading.

Moody’s on Friday lowered its rating on Motorola subordinated debt one level to Ba1 from Baa3. The changes affect about $8bn of debt and preferred securities, Moody’s said. It said Motorola may struggle to boost revenue after losing to Nokia. Motorola’s share of the global handset market is down from 26% in 1996.

Last month, Motorola said it won’t have a new camera phone available for the Christmas shopping season, disappointing customers and wireless-phone carriers.

In July, Motorola forecast third-quarter net income would break even to 2 cents a share, down from 5 cents a year earlier. It said sales would be $6.3bn to $6.5bn, as much as 4% below last year. It said then that profit, excluding certain items, would be 2 cents to 4 cents a share.