Motorola, the world's second largest mobile phone maker, yesterday lifted Wall Street to fresh levels after reporting profits that were twice as high as analysts' expectations.
The company, which is struggling to recover its fortunes after several years marred by profit warnings and sweeping job cuts, also said that sales in the current fourth quarter would be higher than earlier estimates.
The firm rushed its results out a day earlier than scheduled in order to counter a downgrade of its debt by influential credit agency Moody's amid continuing concerns about its future. Its shares climbed almost 3% in early trade to as high as $14.17.
The positive outlook drove broader sentiment among dealers who pushed the Dow Jones 67 points higher to 9,742, its best level for 16 months. The Nasdaq was 13 points higher at 1,928, its highest level for 19 months.
The gains, however, were in thin trade on the United States' Columbus day holiday. Around 20% of the top 500 companies will report third quarter earnings this week and will give a far clearer picture of the faltering recovery of the world's largest economy.
Motorola last week announced plans to spin off its semiconductor business into a separate firm, allowing it to focus more fully on its wireless handset and networks business. The move came barely two weeks after the sudden resignation of the former chairman and chief executive, Christopher Galvin, amid reported clashes with the board regarding the future strategy of the company.
Motorola reported profits for the third quarter of $116m, up from $111m a year ago, and cited a boom in phone orders. President and chief operating officer Mike Zafirovski said the tough actions taken in the past few years, during which the workforce has been cut by a third, were starting to pay off. "We are now seeing early results from the decisive actions taken in a very difficult telecoms and semiconductor global environment over the past three years," he said.
Wall Street had become increasingly impatient with Motorola, which was continuing to produce losses despite relatively strong growth in demand for its core products. Mr Galvin's decision to step down triggered expectations on Wall Street that his replacement would accelerate restructuring at the company. He will stay on until a replacement is found.
Moody's on Friday downgraded Motorola's debt to just one grade above "junk", citing "the weakened outlook for most of Motorola's business segments" - something the firm disagreed with. Mr Zafirovski said the quarter instead "signals some positive momentum in key aspects of our business."
Analysts were still sceptical. "This is the same company that reported strong order numbers this time last year then managed to come out a quarter later and say there was too much inventory," said Alex Vallecillo of Armada Funds.
