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Motorola Cellphone Segment Reports Q3 Profit

Schaumberg, Ill. – Although sales in the Personal Communications Segment, the handset division at Motorola, came in lower than the company expected – a 2 percent drop in the third quarter – operating earnings in the segment improved substantially.

Driven by improvements in its product portfolio and cost structure, Motorola was able to notch a $241 million third quarter operating profit for its phone division, up from an operating loss of $233 million in the year-ago period.

Sales for the segment dropped to $2.63 billion, down from $2.69 billion in the same quarter in 2001. Handset unit shipments were 17 million in the third quarter, ended Sept. 28, an 8 percent increase over the same three months last year.

Motorola expects 2002 industrywide sales of mobile phones to hit 390 million, down from its previous estimate of 400 million.

Sales in Motorola’s cellphone segment helped the company end a streak of six straight quarters of consolidated net losses. Motorola recorded a $111 million net profit in the third quarter, compared with a net loss of $1.4 billion in the year-ago period. The quarter included a $30 million after-tax charge, primarily concerning cost reduction. Excluding special items, the company had net earnings of $141 million in the third quarter, compared with a net loss of $158 million in the year-ago quarter.

Consolidated sales for the third quarter, excluding exited businesses, hit $6.4 billion, a 12 percent decrease from the $7.2 billion recorded in the third quarter of 2001.

Motorola’s extensive restructuring since 2000 has helped the company make significant strides, according to Mike Zafirovski, president and chief operating officer. ‘Our improvement in profitability in the third quarter is a solid indication that our focus on customers, coupled with the aggressive and timely restructuring of the company that began two years ago, is bearing results in a difficult economic environment.’

For the nine months, sales in the Personal Communications Segment edged up 1 percent, reaching $7.6 billion, compared with $7.5 billion in the year ago period. Operating earnings hit $209 million in the nine months for the segment, compared with a $1.7 billion operating loss in the same period in 2001.

Overall Motorola sales for the nine months were $19.1 billion, compared with $22.6 billion in the same nine months last year. Net loss for the period was $2.7 billion, about the same as in 2001.

The company cut its outlook for fourth quarter sales to $7.1 billion, down from its previous estimate of $7.5 billion. Anticipated sales for the 12 months are about $27.5 billion, down from the previous estimate of about $29 billion.

Motorola anticipates a bumpy road to economic recovery. Said Christopher Galvin, chairman/CEO, ‘Rather than a slow but steady quarter to quarter upward trend in global economic growth, it appears now that an irregular short-term up and down economic growth pattern may emerge quarterly.