Motorola benefits from surge in demand

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Motorola, the world's second-biggest manufacturer of mobile phones, beat expectations in the second quarter amid a strong rise in the sale of handsets across the world.

The group, which said its share of the global mobile device sector grew by 3.3 percentage points to 18.1 per cent, reported earnings per share of 38 cents, a 52 per cent increase on the same quarter a year ago.

Revenues rose 17 per cent to $8.83bn, reflecting strong appetite for handsets with features such as colour screens and internet access.

Ed Zander, chief executive officer, said the quarter was “feeling like the grand slam”, with a growing top line, market share and profitability.

Earnings from continuing operations were at $947m, up from $619m in the same quarter last year.

Motorola is second only to Nokia, the Finnish mobile phone maker, in terms of handset sales. Analysts said Motorola was taking market share from smaller operators, in particular. Reflecting this, LG Electronics, the South Korean mobile phone maker, this week cut its forecast for handset shipments by more than 10 per cent and reported an operating loss.

In total, Motorola reported on Tuesday it had shipped 33.9m handsets in the second quarter, up 41 per cent versus the same period in 2004 and an all-time record for the Illinois-based company. Its popular and high-margin all-metal Razr phone, now issued in black as well as silver, has already sold 5m units.

The group said there was strong demand across its products, including low-end handsets. As well as maintaining a lead in the US market, Motorola said it had the top market share in Latin America.

Emerging markets, including Latin America but also taking in eastern Europe and Asia, were likely to remain an area of strong growth and would continue to be a focus, for a range of phones. “There is a great opportunity for . . . low-end products [in India], but if you look at the amount of people in India, for example, who can buy Razr phones, there are also a lot,” said Mr Zander.

Looking ahead, Motorola was also more upbeat than expected. The company said its third quarter 2005 sales were likely to be between $8.9bn and $9.1bn. The outlook for earnings per share from continuing operations in the third quarter of 2005 is in the range of $0.27 to $0.29, it said.

According to Reuters, analysts on average were expecting Motorola to report third quarter 2005 revenue of $8.5bn and earnings per share of $0.25.

Motorola said it would give more details and information about planned handsets at an analysts meeting in Chicago next week. The group has indicated plans for a new phone that will play digital music downloaded from Apple Computer's iTunes online music site but gave no further details on Tuesday.

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