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Moto's profits plummet in Q4

Axing 3,500 jobs

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Motorola, the world's second largest mobile phone maker, is cutting 3,500 jobs, following a drastic fall in profits for the fourth quarter.

The company released its results for the three-month period ending 31 December and the full year, on Friday. Profits for the quarter dropped 48 percent compared with the same period in 2005. The Illinois-based company recorded profits of $624m for the quarter, down from $1.2bn the previous year. This represents earnings per share of $0.25, compared with $0.47 for the fourth quarter of 2005.

The performance of the mobile phone unit was a particular cause for concern with profit margin dropping to 4.4 per cent, down from 12 per cent in the third quarter. The poor showing comes on the back of a quarter that's seen Motorola's share price drop 28 per cent, as the firm cut prices to remain competitive.

"We are disappointed with our fourth quarter operating earnings performance. However, the company generated strong revenue growth and met or exceeded our goals in many areas during the quarter. I am confident that we remain well positioned for continued growth and success," said Ed Zander, chairman and chief executive of Motorola.

Earlier this month the firm's management had warned investors that fourth quarter results would not meet analysts' estimates.

Motorola's full year results paint a prettier picture for shareholders with sales of $42.9bn, representing a 22 per cent increase on 2005. The mobile phone giant shipped 217.4 million handsets in 2006, a 49 per cent increase on the previous year.

"Looking at the full year, I am pleased with our progress. Our business remains solid, and we will continue to execute on our focused, strategic plan to create value for our shareholders. We remain committed to increasing our profitability, while delivering compelling new products and solutions to our customers in 2007," said Zander.

With Nokia comfortably out in front as market leader in the mobile phone market, second-placed Motorola is feeling the heat from the chasing pack. Sony Ericsson's latest results, which were announced Wednesday, have seen it close in on Samsung in third place. Sony Ericsson announced a fourth quarter profit of €502 million, its best performance in this period since the companies began the venture in 2001.

Copyright © 2007, ENN

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