InterDigital Inc (IDCC)

[F6]

(REUTERS) UPDATE 2-INTERVIEW-Motorola banks on brighter year for handsets

(adds views on competition, quotes, details)
By Edwin Chan
SHANGHAI, Jan 8 (Reuters) - Motorola Inc, the world's number
two mobile phone maker, is poised for a turnaround in 2003 after
battling an industry meltdown over the past two years, helped by
a pick-up in the handset market, its president said on Wednesday.
Mike Zafirovski, also Motorola's <MOT.N> chief operating
officer, said he expected industry sales of handsets -- the bulk
of Motorola's business -- to jump eight to 10 percent in 2003
after slack growth last year.
And all of the company's business divisions -- from
semiconductors to wireless infrastructure -- would yield profits
this year after aggressive cost cutting and hefty layoffs since
2000, Zafirovski told Reuters in an interview.
"The past two and a half years have been very painful. We're
starting to see some of the positive results," he said barely six
months after stepping into his present role from heading the
company's main mobile devices division.
"It's safe to say all six businesses would be both cash flow
and profit generating in 2003," said the man known as "Mike Z,"
in Shanghai to launch a range of phones for 2003.
Motorola posted a third quarter net profit in October,
snapping six straight quarters of net losses.
But it trimmed its fourth quarter earnings estimate to 10
cents a share before one-time items, from 14 cents, blaming
slowing demand in several businesses including semiconductors and
high-speed Internet and wireless equipment.
The mobile phone division, which produced 40 percent of the
wireless titan's $29.5 billion in sales in 2001, has been gaining
market share steadily as the industry as a whole recovers from
its worst-ever year in 2001.
SAMSUNG LOOMS
Zafirovski estimated the industry sold 390 million handsets
in 2002, in line with predictions by rivals such as Nokia
<NOK1V.HE>, the world's largest mobile phone vendor.
Analysts estimated that was up a year-on-year 1.8 percent
after a decline of about three to four percent in 2001 that
followed years of runaway growth.
But they said Motorola's number two ranking in the mobile
handset arena was coming under attack, particularly from
up-and-coming rival Samsung Electronics Co <05930.KS>.
Samsung leapfrogged into the world number three slot in 2002,
accounting for an estimated 10 percent of all handsets sold,
racking up strong sales of innovative colour-screen models.
Zafirovski would not predict whether Motorola, due to
announce fourth-quarter results on January 22, could fend off
Samsung and build on its 15 percent share of the market.
But Zafirovski -- known for jogging in oppressive heat and
sleeping only five hours a night -- said Motorola was not unduly
worried about the South Korean mobile phone maker.
"We respect competition," he said. "With no disrespect to
Samsung or anybody else, we're not paralysed. We're energised by
the opportunities which we have."
Those included seizing the number one spot in North America
from Nokia and re-establishing Motorola's dominance in its home
market -- which would happen "soon," Zafirovski said.
"When that happens, we'd celebrate for two seconds and move
on," he said. "We don't like the fact that for something which we
had invented, we're not a strong number one."
In contrast to the galloping handset business, Zafirovski
said the industry was likely to buy less wireless infrastructure
in 2003 than in 2002, compounding the woes of a division that
lost $1.4 billion in 2001 and has long been deemed a takeover
target.
NO TALKS WITH SIEMENS
Siemens AG <SIEGn.DE> -- which has an agreement with Motorola
to license third-generation handsets -- said in October it was in
talks with the U.S. firm on possible infrastructure cooperation.
But Zafirovski said Motorola was no longer talking to
Siemens. Industry sources had speculated the U.S. firm might sell
or swap its networking division for Siemens' handset business,
which ranks a distant fourth in the world.
"We're not having discussions with Siemens today," he said,
when asked if Motorola would offload its network division.
But the executive did not rule out a tie-up if the market
took a turn for the worse. The chip and wireless divisions broke
even in the third quarter of 2002.
"There's no sacred business in Motorola ... Each business
will have to be earning a cost-adjusted return on capital.
There's no exceptions," Zafirovski said.
"They either need to be at those levels in 2004 or 2005, or
some very significant actions will be taken by that point."
Motorola's shares fell 0.1 percent to $9.69 on Tuesday in New
York.
((Reporting by Edwin Chan, editing by Tiffany Wu;
[e-mail]; Reuters Messaging:
[e-mail]; [phone]))
REUTERS
*** end of story ***