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October 6, 1998

MOTOROLA THIRD QUARTER BEATS ESTIMATES

By CBR Staff Writer

Motorola Inc, the Schaumburg, Illinois-based communications, semiconductor and consumer electronics company, beat estimates and reported third quarter net losses of $42m down from profits last time of $266m on revenues down 2.7% at $7.15bn. The company expects the fourth quarter to produce revenues of $7.9bn and earnings per share of $0.22. As part of its cost-cutting program announced in June, Motorola set a target of annualized savings of $750m by the middle of next year. It has already cut costs by $140m in the third quarter so it’s already close to the $187.5m it needs to achieve its target. While Motorola still sees semiconductor sales declining by 11% this year, it is looking for sales growth of between 7% and 9% in 1999. Further economies are clearly on the cards with and talks are planned with Siemens on their joint ventures. The big driver for growth is cellular phones, Motorola’s biggest business and one where it has proved less adept than its competitors. Sales were 8.9% up in the third quarter at $3bn. A flood of new digital releases is designed to overcome the decline in analog revenues. Big shipments of code division multiple access CDMA phones are also expected in the fourth quarter. Time division multiple access TDMA phones will be launched later this month and volume sales of GSM phones are due in the first quarter next year. Motorola brushed aside the five- week delay in the start-up of the Iridium LLC worldwide satellite telecoms system as simply an opportunity to fine tune the system and improve the software, despite evidence of dropped calls and a poor customer handling system. With a 19% shareholding and $430m in debt support, Motorola has a lot riding on Iridium’s success. Motorola is bullish about new products. Its field emission flat panel display units are now being shown to potential customers and its R&D team is looking at how its semiconductor know-how could be used in the rapidly expanding biotechnology industry. Motorola shares climbed 9.2% yesterday to $42.12 though for the moment, cost-cutting rather than growth is turning the company around.

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