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Motorola Q1 Cellphone Sales Rise 2%

Schaumburg, Ill. – Wireless telephone maker Motorola reported a 2 percent increase in sales in the first quarter for its personal communications segment.

This segment, mainly cell phones, climbed to $2.45 billion for the first three months, up from $2.41 billion in the year-ago period.

The handset segment recorded operating earnings of $114 million in the first quarter, compared with an operating loss of $35 million in the same three months last year.

Excluding special items, the personal communications segment reported operating earnings of $108 million in the first quarter, ended March 29, up from $106 million in the first quarter of 2002. For the period, higher gross margins were largely offset by increased investment in research and development, as well as higher selling and advertising costs.

Handset shipments for the first quarter were 16.7 million, an increase of 18 percent, compared with the year-ago first three months. Unit shipments rose faster than sales due to a shift in product mix from high-end to lower-priced handsets.

The shift occurred, said Motorola, because the company has a much broader mix of lower priced handset models that were well received by wireless service providers and consumers. Motorola has claimed the top handset spot in the United States, surpassing its nearest competitor with a 19 percent share, compared to its 16 percent share a year ago, to become the market-share leader.

Although the company said the handset business overall was weaker in the first quarter than expected, it handled the slower pace by controlling its costs, with a concurrent rise in gross margin.

Motorola, overall, continues on track to pull out of a recent deep slump. The company reported a 2 percent consolidated drop in sales for the first three months, down to $6 billion, from $6.2 billion in the year-ago period. However, after a two-year slide, the company posted its third straight quarterly earnings increase, showing a $169 net profit, compared with a loss of $449 million year-on-year.

The company benefited from $148 million in special items during the three months. Excluding special items, consolidated net profit reached $21 million in the first quarter, compared with a $184 million loss in the same quarter in 2002.

Looking ahead, Motorola expects second quarter sales to rebound to $6.4 billion to $6.6 billion. For the full year, the company anticipates about $27.5 billion to $28 billion in sales, with each of its six major segments enjoying positive operating earnings.