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Motorola’s Handsets Blamed For Q1 Loss

4/18/2007 08:59:00 AM Eastern

Schamburg, Ill. — Motorola reported lower sales and a net loss for the first quarter of $181 million due to problems with its handset business.

Net sales for the first quarter were $9.43 billion, down from $9.6 billion in the previous year’s first quarter. Motorola posted net earnings of $686 million during last year’s opening quarter vs. this year’s $181 million loss.

In a prepared statement Ed Zander, chairman/CEO, said, “As I said a few weeks ago, the performance in our mobile devices business in the first quarter is unacceptable and we are committed to restoring it to an appropriate level of profitability.”

The mobile devices segment’s sales were $5.4 billion, down 15 percent compared with the year-ago quarter. Excluding highlighted items, the segment incurred an operating loss of $231 million, compared with operating earnings of $701 million in the year-ago quarter. Lower sales and earnings are attributable to lower overall unit volumes, particularly in the emerging markets and Europe.

Among the moves Motorola continues to review is “rationalizing the segment's product pricing structure and distribution strategy,” according to the company.

Motorola's share of the global handset market for the quarter is estimated to be 17.5 percent. Motorola reported that during the quarter the mobile devices segment shipped 45.4 million handsets.

Motorola reported that during the quarter it had continued solid results in North America and Latin America; announced several new products, including 3G MOTO Q, video-optimized RIZR Z8 and music-enabled Linux/Java ROKR Z6; and is continuing to introduce more devices based on Linux/Java.

Greg Brown, president/COO, said in a statement, “In the mobile devices business, we are very focused on improving operating cash flow and profitability. Across the company, the previously announced cost reduction actions are on schedule. In addition, we are identifying additional cost structure improvements while ensuring that we do not compromise future growth opportunities.”

Motorola’s connected home solutions segment was a bright spot during the quarter, with sales at $1 billion, up 42 percent compared with the year-ago quarter. Excluding highlighted items, operating earnings were $113 million, compared with operating earnings of $47 million in the year-ago quarter, the company reported.

Among some of the achievements of the segment during the quarter are: double-digit growth in sales and operating margin; a quarterly record set with 4.9 million digital entertainment device shipments, including shipments of 1.1 million digital video recorders; and the company's 1 millionth IPTV set top shipped.

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