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10/25/2007
11:06 AM
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Motorola Performance Drops, But Sees Optimism For Fourth Quarter

Despite a 94% year-over-year decline in net income, investors seem to agree with the company's rosy outlook for the end of the year.

Motorola showed hopeful signs in its third quarter financial results, announced Thursday, that it may be pulling out of its cell phone doldrums. While noting that its net income for the quarter tanked 94% over the prior year, the company said its fourth quarter outlook was brightening.

The report, with its optimistic view of the fourth quarter, cheered investors who shot Motorola stock up 4% in early trading Thursday. Even so, the company cautioned that it wasn't out of the woods yet. Motorola said its net income was $60 million -- versus $968 million in the year-earlier quarter -- on sales of $8.81 billion.

"We are pleased with the improvement in the financial performance of mobile devices and we look forward to building upon the progress we have made," said Ed Zander, Motorola's chairman and CEO, in announcing the third-quarter results.

Motorola said sales in its mobile devices segment dropped 36% from a year ago to $4.5 billion. The loss this year was $138 million compared with $843 million in earnings in the year-earlier quarter. Motorola's cell phone handset market share dropped to 13%, according to company figures, as market pacesetter Nokia continued to rack up market-share gains.

Motorola has been introducing a bevy of new mobile phones, but none have captured the public's imagination -- and money -- like its RAZR phone. Motorola continues to milk the iconic phone and noted that it shipped more than 900,000 units of its RAZR 2 model during the quarter and introduced a special edition RAZR 2 for the holiday season. In all, the company said it shipped 37.2 million handsets during the quarter.

The company also observed that it introduced several new handsets including the MOTO U9 music devices, seven W-Series handsets, and a new dual-mode iDEN/CDMA device. "The operating changes in mobile devices are beginning to yield results," said Greg Brown, Motorola's chief operating officer, in a conference call after the results were announced.

Billionaire financier Carl Icahn, a former raider turned stockholder activist, has been prodding Motorola and Zander to improve the company's financials. The third quarter's results are an improvement over the previous quarter's dismal financial performance

Areas of promising growth singled out by Zander in the third-quarter report included WiMax, broadband video, and public safety and enterprise mobility markets.

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