Motorola

(MOT)

is not on solid ground yet. Not even close.

After gaining a few points of mobile-phone market share, trimming one-third of its jobs and threatening its chip and mobile infrastructure businesses with divestiture, Motorola seemed to have found religion in 2001.

The company had blundered along for years, alienating customers and losing its mobile-phone supremacy. What had once been communications muscle became dead weight as

Nokia

(NOK) - Get Report

maneuvered to dominance,

Texas Instruments

(TXN) - Get Report

secured the communications-chip business and the wireless-equipment business remained a mystery to the giant. When Motorola suffered quarterly losses for the first time in decades in 2001, its pace quickened and its resolve reappeared.

Apparently, however, that wasn't enough to turn the business around. Reporting results for its fourth quarter of 2001 (a conference call is scheduled for Wednesday morning), Motorola notched a light $7.3 billion in revenue for a 55 cents a share loss as determined by generally accepted accounting principles (GAAP). Taking away $1.7 billion in pretax charges, including $463 million in severance costs, Motorola lost 4 cents a share.

Wall Street was expecting revenue of $7.5 billion and a nickel shortfall, according to Multex.com. Motorola capped off a majestic 27% swoon in revenue and a 127% slide in earnings from the fourth quarter of 2000's $10.06 billion in revenue and 15 cents a share profit. (Oddly enough, the signs of decay existed already in that heady end to 2000, with a 42% sequential decline in earnings, despite booming sales.)

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Motorola shares fell 5% to $13.53 in Tuesday trading, and are down 19% since it issued a revenue warning for 2002 in mid-December.

Critics will be furious at what has become a Motorola practice of separating out special charges that make it difficult to compare the performance of individual business units and the company as a whole. In the fourth quarter, Motorola's losses neglect the effects of a laundry list of 10 special items that make up the $1.7 billion in pretax charges, from "product portfolio simplification write-offs" to investment impairments. Even though investors continue to air their displeasure with the practice, the company took $4.5 billion in pretax charges during fiscal 2001. Motorola deducted $2 billion from its third-quarter results related to financing given to Turkish carrier Telsim.

Wall Street was expecting the mobile competitor to build off some decent mobile-phone unit progress in the fourth quarter, as well as in 2002. On Dec. 18, however, Motorola warned the Street that it was being far too optimistic for 2002, and the company guided revenue to a 10% decline from full-year 2001 to 2002. Motorola remains convinced that it can turn a profit, regardless of the slimmer sales base. As desperate as business has been for the wireless industry in 2001, Motorola declared that the first quarter of 2002 would be even worse, with an estimated 14% sequential revenue decline.

CEO Chris Galvin offered some scraps about the future in a press release, but advised investors that Motorola will incur losses in the first and second quarters of 2002. Motorola will update its outlook for the first quarter and fiscal year 2002 on Wednesday morning before the market opens.

The mobile-phone unit tallied $3 billion in revenue, an 11% sequential uptick from third-quarter revenue of $2.7 billion. Motorola investors went on alert when CDMA (code division multiple access) buyers

Verizon

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and

Sprint PCS

(PCS)

preannounced lower-than-expected new-subscriber additions in the holiday quarter. Their disappointments might have translated into a 36% drop in orders to $2.2 billion for the technology provider.

More depressingly, however, Motorola continued its lagging ways in the equipment industry, as revenue fell from the third quarter's $1.8 billion to $1.4 billion. The provider has been criticized for its lack of contract wins for upcoming third-generation equipment buys, as well as its absence from large TDMA (time division multiple access) and GSM (global system for mobile communications) contracts in the U.S., where Motorola is much more competitive, compared to its absence from European carrier purchasing.

Life in the chip world remained tough, as the company logged $1.1 billion in revenue, flat with last quarter's sales. It remains to be seen whether customers will migrate to more stable chip vendors now that Motorola management has openly discussed spinning off the chip unit if it cannot improve its performance.