Motorola Reports 55% Decline in Fourth-Quarter Profits

Press Release - January 20, 2007

The worlds #2 manufacturer of mobile phones, Motorola Inc., has announced a sharp drop in fourth-quarter profit, due to stiff competition the a resulting decline in phone prices.

Motorola’s quarterly profit came in at $528 million, or $0.21 per share, compared to $1.177 billion in the final three months of 2005. This decline was foreseen by the company, which issued a warning to shareholders earlier this month.

The main reason for the shortfall, according to Motorola executives, was competitive discounts being given on the RAZR and other handsets.

“Operating margin fell from 12% in the last quarter to under 5% this quarter, and that’s a very steep decline, commented Charter Equity Research analyst, Edward Snyder, noting that “it’s stunning they can drop so much in one quarter.”

Revenue still grew healthily, however, to $11.8 billion, due to the continued popularity of Motorola’s products.

The difference since late 2005, in other words, is not that the RAZR & co. have ceased to be popular, but that a myriad of competing models have surfaced in the slim cell phone market, pushing down the price of Motorola’s handsets, and thus its profits.