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Motorola Posts 45% Decline in Earnings

October 18, 2006|From the Associated Press

Motorola Inc., the world's second-largest cellphone maker behind Finland's Nokia Corp., reported a 45% decline in third-quarter profit Tuesday on revenue that came in well below analysts' expectations.

The earnings met Wall Street's estimates, but sales of Motorola's Razr phones left total revenue nearly half a billion dollars lower than forecast.

Earnings for the July-through-September period were $968 million, or 39 cents a share, down from $1.75 billion, or 69 cents, a year earlier.

Excluding certain items, the Schaumburg, Ill.-based company said operating earnings were 34 cents a share, matching the average estimate of analysts surveyed by Thomson Financial.

Revenue was $10.6 billion, up 17% from $9.05 billion a year earlier but well under the analyst average estimate of $11.07 billion.

Chief Executive Ed Zander blamed the shortfall in part on lower-than-expected sales of wireless network equipment in Europe, the Middle East and Africa. The other half of the missed guidance, he said, resulted from lower sales of certain handsets as customers awaited Motorola's new dual-mode phones, due to ship in the fourth quarter.

Shares of Motorola closed down 64 cents at $24.85 and sank $1.95 to $22.90 in extended trading after the earnings report. They touched a six-year high of $26.30 on Friday.

Revenue from Motorola's cellphone division jumped 26% to $7.03 billion. The company expanded its global market share to an estimated 22.4% and shipped 53.7 million handsets, an increase of 39% from a year earlier but shy of the 55 million that analysts expected.

Morningstar analyst John Slack said Motorola showed no significant problems but its quarter was "a little soft." He said results probably would have been better if the company had not been in transition to the Krzr handset, the Razr update that features a music player and was shipped only last month.

Through the first nine months, Motorola had net income of $3.04 billion, or $1.21 a share, down from $3.38 billion, or $1.34, a year earlier. Sales were $31.1 billion, up 23% from the same period in 2005.

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