By Lisa Beilfuss
Motorola Solutions Inc. said Wednesday that its first-quarter
profit dropped 42%, as a stronger dollar hurt sales.
Revenue was in line with the company's expectation. Adjusted
profit per share, boosted by cost cuts and excluding the impact of
a divestiture, topped the company's projection.
Foreign exchange sliced $40 million off the top line, Motorola
said. In the previous quarter, the company took a $27 million
currency hit.
Earlier this year the company issued tepid full-year guidance on
an expected hit from the stronger U.S. dollar.
On Wednesday, Motorola Solutions lifted its range, in part
because of a leaner cost structure. The company now expects $3.20
to $3.40 in profit per share this year, up from earlier guidance of
$3.15 to $3.35. Motorola still expects revenue to be flat to down
2% from the prior year, which translates to revenue of $5.76
billion to $5.88 billion.
According to Thomson Reuters, analysts have estimated earnings
of $3.25 a share and revenue of $5.81.
At the same time, the company warned that current-quarter
results would miss analysts' expectations. Motorola Solutions sees
per-share profit of 51 cents to 56 cents, on a revenue decline of
3% to 5%, which translates to about $1.34 billion in sales.
Analysts expected 59 cents in per-share profit on $1.4 billion in
revenue.
The Chicago-based communications-equipment maker is considering
a sale of the company, according to media reports in early
February. Motorola Solutions is what remains of Motorola Inc., the
wireless communications pioneer that has been dismantled over
recent years. In 2012, Google Inc. bought Motorola Mobility for
$12.5 billion and then last year sold some of the business to
China's Lenovo Group Ltd. for $2.9 billion. Last year, Motorola
Solutions sold its scanner business to Zebra Technologies Corp. for
$3.5 billion.
In recent quarters, strength in North America has helped offset
sales declines in the company's services segment. And in its latest
quarter, revenue from North America rose 6%, driven by product
segment sales. Revenue from the region made up 62% of the top line
last year.
On a call with analysts, Chief Executive Gregory Brown said
sales in Europe and Africa fell 11% due to currency. Stripping out
that effect, sales in the region rose 1%. Mr. Brown said weakness
in Europe was expected because of the company's ongoing deployment
of its Norway system. Asia Pacific sales declined 5% and were flat
on a currency-adjusted basis.
Overall for the first quarter, the company reported a profit of
$74 million, or 34 cents a share, down from year-earlier earnings
of $127 million, or 49 cents a share. The year-earlier profit
included earnings from the divested scanner business. Excluding
items, per-share profit rose to 38 cents from 28 cents.
Revenue was flat at $1.2 billion.
Motorola Solutions had projected 22 cents to 27 cents in
earnings per share and $1.18 billion to $1.2 billion in
revenue.
Product sales edged 1% higher to $758 million. Service sales,
meanwhile, slid 2% to $465 million.
Backlog increased 8%, what Mr. Brown called "the highest levels
I can remember."
Operating expenses fell 13% to $396 million. On the earnings
call, Chief Financial Officer Gino Bonanotte said the reduction was
driven by cost-reduction activities but noted that lower pension
costs contributed to the expense decline. In late 2013, the company
offered buyouts to hundreds of North American managers. Mr.
Bonanotte said Motorola is on track to deliver cost savings of $150
million to $175 million this year versus 2014.
Shares in the company, down about 13% this year, were little
changed in morning trading.
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