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Motorola Q2 Handset Segment Sales Slide 13%

Schaumburg, Ill. – Motorola reported a decrease in sales, operating earnings and shipments in its personal communications segment in the second quarter. The decreases in its mobile phone business were attributed primarily to intensified competition in China from locally based and foreign handset suppliers, which hurt Asian sales, as well as consumer anxiety created by the SARS outbreak, which exacerbated market pressures in China. Personal communications segment sales dropped 13 percent in the three months, ended June 28, down to $2.3 billion, compared with $2.7 billion in the year-ago period. Segment operating earnings hit $91 million in the second quarter, compared with $3 million year-on-year. However, excluding special items, the segment reported operating earnings of $78 million in the three months, down from $172 million in the same quarter in 2002. Handset shipments reached 15.8 million in the second quarter, off about 5 percent, compared with the same three months a year earlier. For the six months, sales in the personal communications segment decreased 6 percent, hitting $4.8 billion, down from $5.1 billion in the same period in 2002. Segment operating earnings for the six months moved into the black, climbing to $205 million, compared with an operating loss of $32 million in the same period a year earlier. Excluding special items, the segment recorded operating earnings of $186 million in the first half, down from $278 million in the first six months last year. Consolidated Motorola sales in the second quarter dropped 10 percent, reaching $6.2 billion, down from $6.9 billion year-on-year. The company posted a net profit of $119 million, compared with a net loss of $2.3 billion in the year-ago period. However, a large portion of the $119 million gain was earned because of one-time special items. Excluding these, net earnings in the second quarter were $19 million. In the six months, Motorola consolidated sales reached $12.2 million, down from $13.1 million in the first six months of last year. Net earnings were $288 million for the second half, compared with a net loss of $2.8 billion in the same time frame. Excluding special items, current first-half net earnings hit $40 million. Looking to the third quarter, Motorola expects overall sales of between $6.3 billion and $6.5 billion. The company said it would introduce more than a dozen new handsets in each of the third and fourth quarters, with both color displays and integrated cameras.