Motorola’s Disappointment Is Google’s Loss

January 09, 2012

Late Friday, Motorola Mobility (NYSE:MMI) surprised investors by announcing that fourth quarter revenues would be below expectations. The company expects sales to come in at $3.4 billion for the fourth quarter, compared to expectations of $3.88 billion. Motorola said results for the quarter were impacted “by the increased competitive environment in the Mobile Device business and higher legal costs associated with ongoing Intellectual Property litigations.”

The announcement not only sent Motorola shares lower, but also Google Inc. (NASDAQ:GOOG) shares. Shares of the internet search engine king fell more than 4 percent on Monday, as Google has a pending acquisition of Motorola. Google is expected to close on the$12.5 billion purchase of Motorola early this year. The purchase is the largest ever for Google, and is part of a plan to compete more heavily with Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).

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However, the warnings from Motorola reminds investors how difficult it will be for Google to challenge the success of Apple’s iPhone. JP Morgan (NYSE:JPM) analyst Doug Anmuth wrote, the results “may suggest further deterioration in the business since the acquisition was announced, and they highlight the uphill battle for Motorola.”

Motorola also announced it sold 10.5 million mobile phones in the fourth quarter, a decrease from 11.6 million mobile phones sold in the third quarter. Meanwhile, sales of the iPhone continue to increase. Verizon (NYSE:VZ) recently said it sold a record 4.2 million iPhones in the previous quarter, while AT&T (NYSE:T) said it sold around 6 million smartphones in October and November with strong demand for the iPhone.

Last week, shares of Google hit a four-year high of $670.25. It was the first time since January 2008 that Google climbed above $650. On Monday, shares closed at $622.46, which is near its 50-day moving average.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com