To the untrained eye, it would seem that

Motorola

(MOT)

suffered a quarter of a staggering multibillion-dollar loss. But the communications giant is declaring victory in its fight to return to profitability.

First, the unedited version: Motorola reported a steep net loss of $2.3 billion, or $1.02 a share, including a preannounced special charge of $3.4 billion for a companywide restructuring project, on sales of $6.7 billion.

The numbers represent an 11% year-over-year decline in sales from $7.5 billion from the same quarter last year and a net loss that is about three times that of the year-ago quarter's $759 million, or 35 cents a share. Motorola also reported a charge for special items in the comparable second quarter a year ago of $496 million pretax, or $527 million after-tax.

Excluding charges, the company reported a net profit of $48 million, or 2 cents a share for the just-ended quarter on sales that beat analysts' estimates and its own guidance of $6.4 billion.

"After 21 months of hard work, this quarter's results add the return to profitability, excluding the impact of special items, to Motorola's improved cash and balance sheet performance," said Motorola president and COO Edward Breen in a prepared statement. Breen's statement said the charges taken in the past several quarters "will substantially complete the company's restructuring program."

Excluding charges, the company logged a net loss of $238 million, or an 11 cents per share loss in the year-ago quarter.

Wall Street analysts polled by Thomson Financial/First Call expected the company to report a 4-cents-a-share loss on $6.42 billion in revenue.

Motorola shares gained 69 cents, or 4.99% to $14.53, with investors anticipating the company would beat its own estimates. After the postclose report, shares rallied further, gaining another 57 cents, or 3.92% from the close, to $15.10.

Handset sales from the Personal Communications Segment were $2.6 billion, up 5% year over year. Orders, however, were $2.5 billion, down 1% in the same period a year ago.

"The segment's orders decline, even as sales increase, because management is proactively working with wireless service providers, distributors and suppliers to reduce historical levels of backlog through improvements in forecasting, supply chain management and reductions in product complexity," according to a company statement. "Sales are expected to increase sequentially in both the third and fourth quarters of 2002."

Handset operating earnings were $3 million, compared with a loss of $593 million in the prior year. Excluding special items, operating earnings for the segment were $172 million, compared with an operating loss of $195 million last year.

Its handset sales gained 1% market share to 18% from the previous quarter, attributed to strong sales in Europe, North America and Latin America. In China, where Motorola continues to remain the dominant seller, ahead of

Nokia

(NOK) - Get Report

, at 30% of the country's market share, sales were flat. All told, it shipped 16.7 million units, up 1% compared to last year and up 17% sequentially.

To boost PCS revenues, it was reported that the company plans to enter into the made-to-order business with prominent carriers. Motorola made deals with four of the top six national carriers, including

Verizon's

(VZ) - Get Report

wireless business,

Cingular Wireless

,

AT&T Wireless

(AWE)

and

VoiceStream Wireless

to build custom-made phones that will be sold at the $100 price point. It plans to offer more expensive models that cost $250 to $330 later on.

The decision helps assuage perennial carrier demands that companies such as Motorola and Nokia begin to work more closely with carrier clients in order to meet specific demands. Carriers have in the past asked phone manufacturers to offer custom features that correspond to unique services. This issue is further exacerbated by high-speed wireless services that are expected to be made available throughout the nation by the end of this year.

The carrier rebranding agreement is the second of such deals for Motorola this year. In April, it announced a deal with

Siemens

to offer Motorola phones to the German company that will be rebranded for the local markets.

Semiconductor sales were down 3% year over year to $1.2 billion, while orders were up 25% to $1.3 billion. The company said there were signs of a "gradual sequential recovery from the sharp recession it experienced in 2001."

Overall, the semiconductor business logged an operating loss of $1.3 billion, vs. a loss of $444 million in the year-ago quarter. Excluding special items, the segment reported an operating loss of $79 million, compared with an operating loss of $310 million last year.