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Motorola Q3 Phone Sales Drop 16%

Schaumburg, Ill. – Slower growth in its global cell phone business and a suddenly weaker economy double-teamed Motorola during the third quarter, tying up any immediate expectations for a turn-around at the wireless technology giant.

Third-quarter sales in the company’s largest segment, Personal Communications, primarily cell phones, were off 16 percent, dipping to $2.7 billion, compared with $3.2 billion in the third quarter of 2000.

However, market share for wireless handsets climbed by about two percentage points during the third quarter, compared with a year ago, reaching between 17 percent and 18 percent, said the company.

The cell phone segment returned to profitability in the third quarter, following two quarters of losses, a quarter ahead of schedule, It recorded pro forma operating earnings of $19 million during the three months, compared with $189 million in the year-ago period. Orders, however, were down 12 percent, to $3 billion.

The company, which warned of a fourth-straight quarterly loss upcoming in December, said it plans to cut another 7,000 jobs. This comes on the heels of 32,000 jobs eliminated since last December. Total job reduction is 26 percent. The fourth-quarter loss would result in a full-year operating loss.

Motorola also lowered its outlook for global industry-wide mobile phone shipments in 2001 to a range of 380 million to 400 million units, from the 400 million to 425 million units it expected earlier this year. In 2002, the company said it expects shipments of 420 million to 460 million units.

Overall Motorola sales dropped 22 percent during the three months ending Sept. 29, down to $7.4 billion, from the $9.5 billion reported in the year-ago period.

Motorola, overall, reported a loss for the third quarter of $1.4 billion, compared with earnings of $531 million in the third quarter of 2000. It was the company’s third consecutive quarterly loss.

Including a number of pro forma adjustments and special charges totaling $2 billion in the third quarter, the company recorded a loss of $153 million, compared with earnings of $643 million in the same three months last year.

‘Until the unexpected and horrific atrocities of Sept. 11, our predictive indicators seemed to indicate that the world would most probably return to more positive economic growth in the first or second quarter of 2002,’ said Christopher B. Galvin, chairman/CEO. ‘These events make near-term forecasting more challenging.’

For the nine months, sales in Motorola’s cell phone segment slid 24 percent, down to $7.5 billion, from $9.8 billion in the same period in 2000.

The segment’s operating loss reached $1.9 billion, compared with a $47 million gain in the same nine months last year. On a pro forma basis, the nine-month operating loss was $620 million, compared with a $378 million gain in the same period in 2000.

Overall Motorola sales dipped about 17 percent during the nine months, hitting $22.7 billion, down from 27.5 billion in the year-ago period.

The net loss for the nine months was $2.7 billion, compared with earnings of $1.2 billion in the same period in 2000. On a pro forma basis, the loss was $591 million in the nine months, compared with a gain of $1.7 billion in the same nine months last year.