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Motorola dials up dollars in 3rd qtr.

October 20, 2004

BY HOWARD WOLINSKY Business Reporter

With revenues from cell phones on the rise, Motorola's third-quarter earnings shot up more than 300 percent from the same period a year earlier, the Schaumburg technology company reported Tuesday.

"This is our third consecutive quarter of strong sales and pre-tax earnings improvement," said Ed Zander, who joined the company in January as chairman and chief executive. "Customers are responding to our portfolio of new products and technologies by giving us market-share growth in several areas."

Motorola said profits totaled $479 million, or 20 cents per share, compared with $116 million, or five cents per share, a year earlier. Revenue jumped 26 percent to $8.6 billion.

The company received a boost from its cell-phone unit, which posted $390 million in earnings, up from $147 million the previous year quarter. The unit rang up $3.9 billion in sales, up 34 percent.

Mike Zafirovski, Motorola president and chief operating officer, said Motorola increased the number of cell phone models it shipped by 60 percent through the third quarter over a year earlier. The company's Personal Communications Segment cellular phone unit shipped 17 new phone models, 15 of which had color displays and 11 featured integrated cameras.

Zafirovski said the greater number of models "allowed us to hit more niches and segments. We did a much better job of hitting our due dates."

Motorola said it shipped 23.3 million phones, up 15 percent from a year ago, and maintained its global market.

Zafirovski said Motorola is "quite bullish" about prospects in the fourth quarter, when it will introduce new products for the Christmas season, including RAZR, the ultra-thin phone. Last year, the company missed important Christmas shipments of integrated camera phones for Cingular Wireless and Verizon, key customers.

Jane Zweig, chief executive of the Shosteck Group, the telecom research firm, was not surprised by Motorola's strong showing.

"Motorola is making neat-looking phones that people want," she said. "They've also been blessed by missteps by [market leader] Nokia, which doesn't seem to be as innovative as it was before."

She said Motorola also has gained from its new CEO, Zander: "He's got a different style than [former chairman] Chris Galvin. He's an all business kind of guy. He expects execution, and holds people accountable."

Zafirovski said Zander has brought Motorola "urgency on many things, including marketing." He added that new staffers who have joined over the past two years have begun to gel and hit their performance marks.

Zweig predicted that the company will get an additional boost from the new president of its cell phone unit, Ron Garriques, who led a turnaround of Motorola's cellular business in Europe. "Ron sees what Motorola needs to do and does it," she said.

Meanwhile, Nokia and Motorola are both facing energized competition from LG and Samsung.

Other segments of Motorola fared well in the third quarter as well. "There are no smoking guns," Zafirovski said, referring to the earnings.

Among the third-quarter results:

*The broadband set-top box unit's earnings climbed to $34 million from a $4 million loss a year earlier. Revenues rose 31 percent to $589 million.

*The once-suffering cellular infrastructure group saw earnings rise to $175 million from $61 million a year before. Sales were $1.3 billion, up 24 percent.

*The semiconductor group went from a $76 million loss a year ago to $82 million in earnings. Revenue totaled $1.4 billion, up 17 percent. By year's end, Motorola will complete the spin-off of this unit as Freescale Semiconductor.

*The government communication business with two-way radios for public safety increased earnings to $185 million from $146 million. Revenues were $1.2 billion, up 12 percent.

Motorola projected fourth-quarter sales of between $9.3 billion and $9.6 billion, a 16 percent to 20 percent increase from last year.

Motorola said it now has $4.4 billion in net cash available compared with a debt of $41 million at the end of last year.

http://www.suntimes.com/output/business/cst-fin-moto20.html