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To: Johnny Canuck who wrote (39905)	7/16/2003 12:41:04 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 72028

Motorola posts profit, cuts forecasts By Reuters July 15, 2003, 6:19 PM PT Motorola, the No. 2 wireless telephone maker in size, posted a second-quarter profit Tuesday. The company overcame a challenging quarter as sales slipped and it reeled in forecasts in the face of intense competition in the Chinese phone market. Shares of Motorola fell slightly in after-hours trading after it released its results. A slowdown in demand for mobile phones has been exacerbated by tougher conditions in Asia, where the SARS outbreak and increased competition from Chinese rivals hurt sales. China accounted for about 14 percent of Motorola's sales last year. Motorola has the largest share of the mobile phone market in China, where severe acute respiratory syndrome has hit the hardest. That forced Motorola to warn investors last month that sales and earnings would be lower than its earlier forecasts. Motorola President Mike Zafirovski said in a conference call that the company expected to improve its position by introducing new phones, increasing its investment in local design and engineering, and stepping up distribution to smaller cities. "It's no big surprise that the company doesn't want to go out and get too bullish after preannouncing the previous quarter,'' said Matthew Hoffman, wireless equipment analyst with SoundView Technology. Motorola in June cut its outlook for its second quarter and full year, although it did not provide details for 2003 sales and earnings. On Tuesday, telecom equipment company Lucent Technologies pushed back its targets for profitability. "What's really going to hold the stock back is going to be Lucent," Hoffman said. Finnish rival Nokia, the world's largest mobile phone maker, is also expected to give a cautious outlook when it reports on its results later this week as conditions in China temper signs of improvement in the United States. Motorola shares dipped to $9.70 in after-market trading on Instinet after closing at $9.78 on the New York Stock Exchange. The Schaumburg, Illinois-based company posted a second-quarter net profit of $119 million, or 5 cents a share, compared with a loss of $2.3 billion, or $1.02 a share, in the year-ago quarter. Excluding one-time items, including reversal of employee severance, gains on sales of investments and reversal of reserves that had been set aside, it posted a profit of a penny a share versus 2 cents a year ago. Sales slipped to $6.2 billion from $6.7 billion a year ago, at the high end of the company's estimate. "They continue to make a lot of operational changes to streamline the cost structure, but as quick as they cut costs, the prices keep going down,'' said Rob Siewert, an analyst with Victory Capital Management. Motorola said it expects third-quarter earnings of breakeven to 2 cents a share on revenue of $6.3 billion to $6.5 billion. It expects earnings, excluding special items, of 2 cents to 4 cents a share. Analysts had expected earnings of 5 cents a share on revenue of $6.5 billion for the third quarter. "Their guidance for the following quarter is really quite tepid,'' said Paul Sagawa, a Sanford Bernstein analyst. "That's indicative of some difficult market conditions in many of their businesses. It also reflects some riskiness around the handset business." Sales at Motorola's mobile phone unit fell 13 percent from last year to $2.3 billion, while its operating earnings rose to $91 million from a profit of $3 million a year ago. Motorola's semiconductor unit saw sales fall 11 percent from last year to $1.1 billion. Its operating loss fell to $125 million from $1.3 billion last year. Sales at its wireless equipment unit fell 17 percent to $1 billion. Story Copyright © 2003 Reuters Limited. All rights