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Motorola Q2 Phone Sales Dive 25%

Schaumburg, Ill. – Taking it the chin from difficulties in both the telecommunications and semiconductor industries, wireless technology Motorola reported an overall $759 million net loss and 19 percent decline in sales for the second quarter.

Cellphone sales dropped 25 percent to $2.5 billion, while semiconductor revenues decreased 38 percent to $1.3 billion.

As part of its third restructuring in three years, Motorola took a $496 million charge against earnings in the second quarter ended June 30. Excluding the one-time items, the company lost $232 million, compared with a gain of $551 million in the year-ago three months. Sales in the quarter were $7.6 billion, compared with $9.3 billion in the second quarter of 2000. The drop came after Motorola had said in April it expected sales to increase somewhat from the $7.8 billion recorded in the first quarter.

Motorola, which is the No. 2 mobile phone maker behind Nokia, said its personal communications segment incurred an operating loss of $237 million in the second quarter, compared with operating earnings of $136 million in the second quarter of 2000. Orders were $2.9 billion, down 9 percent.

Placing the blame for the decline in its communications business on lower worldwide demand for wireless phones by service providers and average selling price declines resulting from substantial shipments of end-of-life products, Motorola said sales and orders for wireless phones in the Americas were down. Industry sales of handsets worldwide, which at one time were expected to come close to 600 million in 2001, are now estimated at about 370 million.

‘The decline in communications equipment orders is worse than many in the industry first believed,’ said Christopher Galvin, chairman/CEO. ‘The industry’s fundamentals are weak and the imbalance between inventories and demand has spilled over into Europe.’ Galvin, however, said Motorola’s wireless telephone business is already showing signs of recovery, and that he expects to see an increase in consumer demand beginning in the third quarter. He also expects the semiconductor industry to resume double-digit growth next year.

On the bright side, Motorola’s broadband communications segment sales, namely cable set-top boxes, rose 7 percent to $820 million, while operating earnings increased to $145 million from $137 million. Orders, however, fell 16 percent to $760 million.

For the six months, sales at Motorola slipped about 15 percent to $15.3 billion, down from $18 billion in the same period in 2000. The company lost $1.3 billion, compared with earnings of $652 million in the same six months last year. Including pro forma adjustments, Motorola lost $438 million in the six months, compared with a gain of $1 billion in the same six months the previous year.