Motorola Corp has been unable to secure a deal with Apple Computer Inc’s de facto leader Steve Jobs and is to dump its one year-old Macintosh clone business. It will continue to sell existing StarMax systems and will have a third party ship MacOS 8.0 on the boxes, but only in the US. There will be no new designs, but it didn’t say whether it would make other Mac operating systems, such as BeOS, available on these or other systems. Motorola said the conditions laid down by Apple – which it was negotiating with until late Wednesday – mean there is no viable clone business model as far as it is concerned. Its semiconductor group will continue to supply Apple with PowerPC chips. It said ousted Apple CEO Gil Amelio had got it into the clone business – now Jobs has forced it out. As a result, Motorola expects to take a charge of about $95m in its third quarter, leading to earnings that will be significantly lower than expectations, currently at $0.62 per share. In addition, the company says that the results, due October 6, are expected to be hit by weakness in the two largest markets for paging products. In the US, an ongoing inventory reduction initiative hurt sales and in China the paging market has seen a larger-than-normal seasonal downturn. Both factors could continue into the fourth quarter, Motorola warned. The bad news continues as Q3 results will also reflect the impact of increased expense in recognition of Motorola’s share of Iridium LLC’s net losses, as well as increased expenses accrued by the flat panel display business. The combined impact of these last two factors is expected to result in roughly $20m more expenses than in the second quarter. Motorola shares got hammered in the wake of the news, falling $8.375, or just over 11%, to close at $66.
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