Motorola Expects Strong Sales Growth in Second Half

SINGAPORE – Motorola Inc. (MOT), the world's second-largest mobile phone maker, said on Tuesday it expects to sustain strong sales growth in the second half of 2004 thanks to new handsets with innovative designs and features.

"We obviously had a very good first and second quarter where we blew past anybody's estimates of what we would do," said Geoffrey Frost, senior vice president for Motorola's mobile phone division.

"We feel very good about the second half of this year given the product portfolio and as we accelerate our product development time, we expect momentum to continue," he said in an interview in Singapore.

Motorola plans to launch about 20 new models in the final six months of the year. They include a 0.5 inch-slim flip phone with a nickel-plated keypad and aluminum casing, and a video and music-playing handset with stereo sound.

Gartner Group analyst Nick Ingelbrecht said the new phones looked promising.

"They've done well, but have some more work to do -- they're not entirely out of the woods yet," he said. Motorola must ensure that delays in the launches of new models, which plagued the company last Christmas, did not recur, he said.

Last month, U.S.-based Motorola beat Wall Street expectations for the second straight quarter when it reported its results, minus one-off items, for the three months to June, as it won share from rivals like Finland's Nokia (NOK). Sales in the quarter rose 41 percent and it forecast stronger-than-expected sales in the third quarter.

Excluding one-time items, Motorola earned 21 cents a share for the second quarter, above analyst forecasts of 18 cents per share, according to Reuters Estimates.

Market leader Nokia was stung for the second consecutive quarter, with its share falling to 28.9 percent from 36 percent, as it struggled to revitalize its ailing phone portfolio.

The Finnish firm has tried to halt its market share erosion by cutting prices on selected models by up to 10 percent, triggering investor concern, analysts said.

Frost dismissed suggestions that Motorola had suffered a big blow from Nokia's strategy, but admitted the discounts had created "a lot of pricing pressure" on its low-end phones.

When asked if Motorola expected to keep average selling prices (ASPs) stable in the coming quarters, Frost was upbeat.

"We've not had a great line-up of high-end phones and the fact we were able to maintain ASPs in the second quarter with our portfolio would lead me to be pretty optimistic about the second half."

Motorola was gearing up for a more intense battle in China, the world's largest cellphone market by users, he said.

According to investment bank J.P. Morgan (search), Nokia overtook Motorola in June with a 15.5 percent share of the China market, compared with the latter's 14.1 percent.

"We're redoubling our efforts to attack. It's a lot like a basketball game with a two-point difference, it's a quarter-to-quarter battle," he added.