CHICAGO - Motorola Inc. shares fell more than 6 percent Friday morning after the world's second biggest cell phone maker reported slightly lower than expected revenue for the fourth quarter.
Motorola is banking on new Razrs to do in 2006 what the first models did last year: reap huge sales gains and reverse the company's image from laggard to leader in handset design.
But Wall Street already is showing it will be disappointed with anything less, and sent its shares lower Friday despite Motorola's report of better-than-expected earnings for the fourth quarter. Revenue rose 18 percent to $10.43 billion, but that was below analysts' estimates of $10.51 billion.
The report was released after the markets closed Thursday.
Motorola shares fell $1.57, or 6.5 percent, to $22.78 in morning trading on the New York Stock Exchange.
The sell-off underscored how far Motorola has come from the days of chronic underperformance, when even nearly doubling its profits is somewhat of a disappointment.
"Razr shipments were strong, as expected," said analyst Matt Hoffman of Moors and Cabot Capital Markets. "It remains a very popular phone in the marketplace." But 11.1 percent margins and other results still disappointed some, he said, because of the changed view concerning Motorola's expected performance.
"Margins certainly didn't beat anybody's expectations. With a high flier like Motorola, people were expecting a lot," he said, calling the results "OK" overall.
Strong sales of the original Razr and 26 new cell phones, including some Razr variations, helped Motorola post an 86 percent profit gain and more are on the way as rivals try to copy the trendy handsets.
New black and pink versions of the Razr are being counted on to extend the success of the brand. In addition, new models such as the Slvr and the Pebl are getting strong early receptions in the market, according to Motorola.
"I think the year of 2005 was the Razr and the year of 2006 is more Razrs," CEO Ed Zander told analysts Thursday when asked how Motorola can maintain its momentum.
The company came in shy of Wall Street expectations with sales of 44.7 million handsets during the fourth quarter.
Morningstar Inc. analyst John Slack said Wall Street might have gotten "a little greedy" by expecting a blowout quarter to cap Motorola's stellar year.
"These are great numbers," he said. But compared with lofty expectations, "they delivered but they didn't exceed."
Net earnings for the October-through-December quarter were $1.2 billion, or 47 cents per share, up from $647 million, or 28 cents per share, a year earlier.
Excluding certain items, including a gain from a legal settlement with Turkish network operator Telsim and tax adjustments, earnings were 35 cents per share. That was a penny more than the mean estimate of analysts surveyed by Thomson Financial.
Motorola pegged its world market share at 19 percent, up 3 percent in a year and 0.5 percent from the third quarter, which would strengthen its second-place position but still leave it far behind Finland's Nokia.
Zander said the company is watching its competitors try to come up with their own versions of the Razr but he likes the early results of the matchup.
"It's nice that competitors are following us," he said. "I'd rather have it that way — I'd rather set the agenda."
Results among Motorola's smaller units were mixed. Its government unit saw operating earnings rise 41 percent on an 8 percent increase in sales to $1.8 billion, the networks segment had an 18 percent drop in earnings on a 4 percent drop in sales to $1.5 billion, and its connected home division had $60 million in earnings on a 1 percent rise in sales.
The company said it expects first-quarter sales of between $9.3 billion and $9.5 billion and earnings of 27 cents to 29 cents, excluding stock-option expenses of about 2 cents per share. Both those forecasts are within the range expected by analysts.
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