Chip biz IPO pushes Motorola into the red

But big handset sales yield big income growth

Motorola yesterday reported that it had experienced a big jump in sales during its second quarter. However, the upcoming IPO of its chip division, Freescale, knocked its earnings for six.

Sales the for the quarter totalled $8.7bn, up 41 per cent from Q2 2003's $6.2bn and up 1.2 per cent from Q1 2004's $8.6bn.

That yielded pre-tax earnings of $800m, up 614 per cent on the year-ago quarter's $112m. However, a one-off charge of $898m, the result of the Freescale spin-off, pushed the group into the red. Tax gains and other expenses offset that a little, taking Motorola's final loss to $203m (nine cents a share). This time last year, the final figure was income of $119m (five cents a share). During Q1 2004, Motorola earned $608m.

Like Nokia and Sony Ericsson before it, Motorola reported strong mobile phone sales, up 67 per cent year-on-year to $3.9bn. Handset shipments were up 52 per cent between Q2 2003 and Q2 2004, to 24.1m units. Those sales yielded operational earnings of $394m, up from Q2 2003's $91m.

Motorola attributed its gains here to "the success of new products". Essentially, the company finally began to see the results of its very late shift to handsets with integrated - as opposed to plug-on - cameras.

Motorola's other operations all yielded solid, double-digit year-on-year gains, most notably its telecoms infrastructure business, which saw sales rise 38 per cent to $1.4bn. The division's operating earnings grew from $19m to $208m over the same period.

Motorola ended the quarter with a net cash position of $1.8bn.

Looking ahead, the company said it anticipates Q3 sales to come in between $8.4bn and $8.8bn, implying a slight decline over Q2, but still up 25-30 per cent on Q3 2003. Motorola expects to go back into the black, with earnings reaching 15-19 cents a share, with the company taking a further hit on the Freescale IPO. ®

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