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Thursday, March 28
The Indiana Daily Student

Motorola earnings rise 14 percent, beat estimates

CHICAGO -- Motorola Inc., the world's second-largest mobile phone maker, reported a better-than-expected 14 percent increase in first-quarter earnings Wednesday, continuing its comeback on another solid rise in sales.\nCoupled with stronger-than-anticipated profits and sales from Intel Corp., Wednesday's first-quarter results added up to a more than respectable early scorecard for the tech sector despite concerns following an earnings shortfall from International Business Machines Corp. last week.\nSchaumburg, Ill.-based Motorola cited the success of its latest phones as fueling a sixth consecutive strong quarter, during which time it has ramped up its effort in new products, spun off its struggling semiconductor business and changed top management.\nSecond-year CEO Ed Zander said the "bang-up quarter" in cell phones had enabled the company to boost its share of the world market to an estimated 17.1 percent, the highest it's been since late 2002. Finland's Nokia, which reports earnings Thursday, remains the runaway leader.\n"We were able to grow market share, gross margin and profits in a very tough, competitive market due primarily to our focus on execution, innovative products and increased global focus -- and we see more growth ahead," Zander said.\nMotorola's net earnings were $692 million, or 28 cents per share, up from $609 million, or 25 cents per share, a year earlier.\nEarnings from continuing operations, also 28 cents per share, easily exceeded the consensus estimate of 19 cents per share by analysts surveyed by Thomson Financial.\nRevenue rose to $8.16 billion from $7.44 billion, up 9.7 percent and topping Wall Street's expectations of $7.72 billion.\nMotorola said sales from the cell phone business rose 6 percent to $4.4 billion. The company's primary unit posted operating earnings of $440 million, up from $406 million.\nThe company shipped 28.7 million cell phones during the quarter, or 13 percent more than a year earlier, and continued to benefit from its ultra-slim Razr and an array of other new products. It announced 27 new devices during the quarter and began shipping seven others.\n"It looks like they've got momentum," said Morningstar analyst John Slack. "This is increasingly a product-driven business, and right now they've got the hot hand."\n"Those are good numbers," Brian Modoff, an analyst for Deutsche Banc Securities, said of the results from the mobile phone division in particular. "You're clearly seeing the strength of their product line."\nHugues de la Vergne, principal analyst with market research firm Gartner Inc., said Motorola's share gains in North America and Latin America, where it is No. 1, were impressive. However, he added, "their CDMA portfolio is still lagging and needs to be addressed in 2005."\nZander noted that the improvements came despite a 2 percent decline in average selling price, which is a key industry barometer of performance. But the high-end Razr, which was introduced last fall and costs $450, remains the "flagship," he said.\n"Without question, the Razr is the standout," the CEO told analysts on a conference call, while disclosing few specifics about its sales.\nNot all the company's new phone projects have gone off smoothly. The highly anticipated new iTunes phone was supposed to have been unveiled six weeks ago before a last-minute delay; Zander said Wednesday it will come out in the next few months.\n"We're on track," he said in response to a question. "We just didn't get all of our ducks lined up when we wanted to show it"

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