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Wed, Oct 15, 2003 - Page 12 News List

Motorola exceeds expectations

SURPRISE ANNOUNCEMENT The company's third-quarter results revealed a profit of US$116 million and a sales increase of 5 percent, beating analysts' predictions

AP , CHICAGO

Motorola Inc issued better-than-expected third-quarter results and an upbeat forecast, rushing out its earnings report early to counter a Moody's downgrade of its debt and concern about its future.

The company announced Monday a US$116 million profit and cited a boom in orders for new cellphones as evidence its stuttering recovery remains on track despite a pending leadership change and Wall Street's skepticism.

Sales -- a figure watched closely as a barometer of its health -- rose 5 percent instead of falling as many industry experts had predicted.

Even its money-losing semiconductor business, which the company said last week it intends to spin off, picked up more orders in a modest recovery that could stir up more interest among prospective buyers.

Net earnings for the three months ended Sept. 27 amounted to US$0.05 a share, compared with a gain of US$111 million, or US$0.05 a share, for the same period last year. Excluding US$16 million in special charges, earnings were US$132 million or US$0.06 per share -- US$0.03 higher than the consensus estimate of analysts surveyed by Thomson First Call.

Revenues climbed to US$6.83 billion from US$6.53 billion, thanks partly to an 8 percent jump at its No. 1 business unit, mobile phones, which totaled US$2.9 billion.

The Schaumburg, Illinois-based company increased its guidance for fourth-quarter sales to between US$7.5 billion and US$7.8 billion, up from US$7.4 billion.

"We are now seeing early results from the decisive actions taken in a very difficult telecom and semiconductor global environment over the last three years," said president and chief operating officer Mike Zafirovski.

Motorola had scheduled its earnings report to be released yesterday after the close of trading. It decided instead to issue them before the stock market opened Monday as a result of the downgrade of its debt late Friday by Moody's to one step above junk status.

Moody's said it made the downgrade in light of "the weakened outlook for most of Motorola's business segments" and expected changes after the resignation of chairman and CEO Christopher Galvin, who is staying on until a successor is named.

But company officials strongly disagreed with that characterization, and Zafirovski, who is a candidate to replace Galvin, said the third quarter "signals some positive momentum in key aspects of our business."

Most notably, orders rose 25 percent from a year earlier -- including 44 percent for its cellphone business, to US$3.7 billion. While declining market share in China caused a drop in operating earnings for the phone unit -- to US$165 million from US$225 million -- the company cited strengthened demand in North America and elsewhere.

Zafirovski acknowledged to analysts that the company has been slow to come to market with some of its camera phones. Competitors have gotten a significant head start with that item, one of the hottest new consumer electronics products.

"We wish we'd have had more camera phones earlier in the year," he said on an afternoon conference call. "But they will be 50 percent of our portfolio in Q4."

Company executives also maintained that Motorola is in strong position to repay its debt that matures in 2005 despite concerns voiced by Moody's and others. Galvin called it one of the strongest quarters in its 75-year history, emphasizing a strengthened financial situation.

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