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Motorola Posts $397M 3Q Loss; Dr.Sanjay Jha Finally Speaks

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 30, 2008

According to Sanjay Jha, Motorola’s co-chief executive officer and chief executive officer of Mobile Devices, while the company’s intent remains intact, it no longer targets to complete the transaction in the third quarter of 2009, primarily due to the macro-economic environment, stresses in the financial markets and the changes underway in Mobile Devices. The separation of the businesses is now targeted beyond 2009.

Motorola, Inc. (NYSE: MOT) today reported sales of $7.5 billion in the third quarter of 2008. The GAAP net loss from continuing operations in the third quarter of 2008 was $397 million, or a loss of $0.18 per share. This included net charges of $0.23 per share from highlighted items, which are outlined in the table at the end of this press release. Greg Brown, Motorola’s co-chief executive officer and CEO of Broadband Mobility Solutions, said, “The company had positive operating cash flow of $180 million and ended the quarter with a total cash* position of $7.6 billion. Our balance sheet and liquidity position give us agility and flexibility in today’s weakened global economy and turbulent financial markets. In addition, we benefit from a global customer base and a broad portfolio of products and solutions that meet the needs of our customers.”

Brown added, “In the third quarter, we continued to expand operating margins in our Home and Networks Mobility and Enterprise Mobility Solutions segments. While we will continue to prioritize investments on opportunities for growth, we are also improving our cost structure across the company by implementing further cost reductions. The initiatives announced today, together with prior actions, will result in total estimated annual savings of $800 million in 2009.” Sanjay Jha, Motorola’s co-chief executive officer and CEO of Mobile Devices, said, “While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009, primarily due to the macro-economic environment, stresses in the financial markets and the changes underway in Mobile Devices. We have made progress on various elements of the separation plan and will continue to prepare for a potential transaction at the appropriate timeframe that serves the best interests of the company and its shareholders.”

Jha added, “As part of our plan to rebuild Mobile Devices, we have announced significant actions to accelerate the consolidation of our product platforms and refocus our investment and market priorities. These efforts will result in a leaner organization with a more competitive and cost-effective product portfolio.”

Motorola Announces Third-Quarter Financial Results

Third-quarter sales of $7.5 billion
Positive operating cash flow of $180 million; total cash position of $7.6 billion
Separation of the businesses targeted beyond 2009
Implementing further cost reductions with an estimated annual savings of $800 million in 2009
Mobile Devices sales of $3.1 billion; shipped 25.4 million handsets
Home and Networks Mobility sales of $2.4 billion; operating earnings increased to $263 million, an increase of 65 percent compared to the third quarter of last year
Enterprise Mobility Solutions sales of $2.0 billion; operating earnings increased to $403 million, an increase of 23 percent compared to the third quarter of last year

Operating results

Mobile Devices segment sales were $3.1 billion, down 31 percent compared to the year-ago quarter. The segment reported an operating loss of $840 million, compared to an operating loss of $248 million in the year-ago quarter. The loss this quarter includes significant charges, primarily related to decisions and plans to consolidate silicon and software platforms and simplify the product portfolio.

Mobile Devices highlights:

Shipped 25.4 million handsets and began shipping 16 new products to key markets, including three new 3G devices
Launched Motorola KRAVE™ ZN4, which features two layers of touch – on an interactive clear flip outside and a full touch-screen inside
Expanded our ROKR portfolio with three new music-optimized devices, the MOTOROKR EM30, MOTOROKR EM28 and MOTOROKR EM25
Delivered several additional CDMA and companion products, including Motorola Rapture™ VU30, MOTO™ VU204 and MOTOPURE™ H15 Universal Bluetooth® Headset
Announced AURA™, a high-tier mobile device with timeless, classic design

Home and Networks Mobility segment sales were $2.4 billion, down 1 percent compared to the year-ago quarter. Operating earnings increased to $263 million, which represents an increase of 65 percent compared to operating earnings of $159 million in the year-ago quarter.

Home and Networks Mobility highlights:

Expanded operating margin year-over-year from 7 percent of sales to 11 percent of sales
Shipped 4.1 million digital entertainment devices, compared to 2.7 million in the year-ago quarter, due to continued strong demand for HD, HD/DVR and IPTV devices
Signed multiple contracts worth $431 million with China Mobile Communications Corporation for its GSM network upgrades and expansion
Announced the multimedia set-top platform and its first implementation with KDDI, an operator in Japan
Won IPTV contract with Deutsche Telekom in Germany

Enterprise Mobility Solutions segment sales were $2.0 billion, up 4 percent compared to the year-ago quarter. Operating earnings increased to $403 million, which represents an increase of 23 percent compared to operating earnings of $328 million in the year-ago quarter.

Enterprise Mobility Solutions highlights:

Expanded operating margin year-over-year from 17 percent of sales to 20 percent of sales
Continued to realize strong international demand in the government and public safety markets
Launched APX™, the industry’s first Project 25 multi-band radio with multi-agency interoperability, dual-sided portable operation and integrated GPS
Completed acquisition of AirDefense, a leading wireless LAN security provider, subsequent to the end of the quarter
Signed a definitive agreement to sell the biometrics business to SAFRAN, subsequent to the end of the quarter

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