Motorola Personal Communications Sales Climb 20% in Q4 to $3.3 Bil.

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SCHAUMBURG, Ill. -- Sales in the Personal Communications Segment at Motorola Inc. -- namely wireless phones, which accounted for nearly one-third of the company's overall business -- climbed 20 percent to $3.3 billion in the second quarter ended July 1, compared to the $2.8 billion registered in the same three months in 1999.

Operating profit in the Personal Communications Segment for the period increased 5 percent to $132 million, compared to $125 million a year ago. Operating profit margin in the second quarter recovered to 4 percent of sales versus 2 percent of sales in the first quarter of this year and was about the same as the profit margin in the second quarter of 1999.

Sales of wireless phones increased significantly, according to Motorola, with digital wireless sales representing 97 percent of phone sales in the second quarter. Orders were up significantly in the Americas for the three months, up in Asia and down significantly in Europe due to the company's decision to more selectively pursue orders for lower-tier wireless phones and, in particular, to de-emphasize older, less profitable models that are being discontinued.

Motorola reported it began the second quarter with significant backlog in its newer lower-tier model phones, contributing to a backlog that started the quarter at about 120 percent more than the prior year. Backlog at the end of the second quarter remains strong, up more than 60 percent vs. the year-ago quarter.

Sales and orders for paging products declined significantly in all regions due to lower unit volumes. Consumer two-way radio product sales and orders were higher.

Motorola reported record overall company sales of $9.3 billion in the second quarter, an increase of 22 percent for ongoing operations from the $7.6 billion reported in the same three months in 1999. Excluding special items, earnings for the second quarter were a record $515 million, up 91 percent from the $269 million recorded in the same period last year. Net margin on sales was 5.6 percent, up from 3.5 percent in the same three months last year.

Including sales from business sold after the second quarter in 1999, Motorola's sales climbed 15 percent from $8 billion a year ago. Including the earnings from businesses sold after the second quarter in 1999, second-quarter income soared 66 percent from the year-ago figure of $311 million. Including special items, earnings were $204 million, compared to $255 million in the same period of 1999. The 1999 figures have been restated to reflect the merger with General Instrument Corp.

"Overall results continue to show solid improvement in sales and profits," said Robert L. Growney, president and chief operating officer. "We have made good progress in addressing the profitability issues experienced by the Personal Communications Segment in the first quarter."

"This is the eighth consecutive quarter of delivering on our promises to achieve a significant turnaround, improved profitability and a strategic refocusing of Motorola around wireless, broadband and the Internet," said Christopher B. Galvin, chairman/CEO.

Motorola said sales in its Broadband Communications Segment jumped 23 percent to $768 million in the second quarter, compared to $625 million the same three months in 1999. Operating profit jumped 65 percent to $129 million from the $78 million earned in the same period last year. Among other factors, primarily sales growth, operating profits continued to benefit from synergies achieved through the merger with General Instrument, the company said.

In the first six months, sales from Motorola's on-going operations rose 21 percent to $18 billion, up from $14.9 billion in the same six months in 1999. Including sales from businesses sold after the second quarter in 1999, sales increased 14 percent, from $15.8 billion a year ago.

Earnings from on-going operations for the six months, excluding special items, were $963 million, compared with $453 million a year earlier. Including the earnings from businesses sold after the second quarter in 1999, six-month earnings were $964 million, compared to $524 million in the same six months in 1999.

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