I read that the Latter-day Saints believe in Muhammad as prophet. How true is this and what does it mean for them?
While Latter-day Saints respect the beliefs of others, they don't revere or recognize Muhammad as a prophet.
In LDS history, the first prophet in our dispensation (a consecutive period of time where the gospel is on the earth and revealed, or "dispensed," through prophets) was Joseph Smith. Before that, the last prophet we have record of is Moroni, son of Mormon, who compiled The Book of Mormon. That was about 421 A.D, well before Muhammad's time.
I know this is an old question, but I thought I'd provide some additional perspective.
First, though, we need to define what a prophet actually is (from an LDS perspective). In Preach My Gospel, the LDS Church's official training manual for its missionary program, a prophet is defined as:
From this definition, we learn (among other things) two attributes of a prophet that are particularly relevant to this question:
Since Latter-day Saints don't believe Muhammad received priesthood authority (see D&C 42:11), and he didn't testify of Christ, he would not qualify as a prophet.
However, that does not mean Mormons reject the possibility that some of Muhammad's teachings could be inspired of God. From the Book of Mormon:
More specifically, the following quote directly references Muhammad (see link to Preach My Gospel above for details):
While the teachings of Muhammad and others are not considered authoritative like the teachings of the prophet, Mormons believe that there is much truth and goodness that comes from the teachings of others not of their faith. Brigham Young (the second LDS prophet) stated:
In short, the answer to the question is no, Mormons don't consider Muhammad to be a prophet. They do, however, believe that much of what he taught is good, and of God.