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Motorola No Salve for Tech

CEO Ed Zander admits supply constraints caused some pain.

Updated from 5:17 p.m. EST



posted fourth-quarter numbers that were generally in line with Wall Street's estimates but failed to ease investors' concerns about the health of the tech sector.

Shares of the No. 2 cell-phone maker dropped 6% in late trading after the company admitted that supply bottlenecks hurt handset sales in the latest quarter. Even so, CEO Ed Zander told investors on a postclose conference call that the mobile-phone division "hit the ball out of the park" and promised the issues wouldn't hurt the first quarter.

The Schaumburg, Ill., wireless giant made $1.2 billion, or 47 cents a share, up from the year-ago continuing operation profit of $680 million, or 28 cents a share. Latest-quarter earnings were aided by 12 cents a share worth of unusual items. Excluding those gains, the fourth quarter's 35-cent adjusted profit beat Wall Street's expectations by a penny.

Motorola also provided in-line guidance on its first quarter ending in March, forecasting a profit of 28 cents a share on sales of $9.4 billion.

Elsewhere, the news was more mixed. The company posted revenue of $10.43 billion in the fourth quarter ended Dec. 31, up 18% from a year ago but a shade light of the $10.5 billion Thomson First Call analyst consensus estimate. Motorola sold 44.7 million handsets in the quarter, about on par with the 45 million unit-sale expectation. Operating cash flow hit $2.1 billion.

"We are very pleased about our record fourth-quarter and full-year results," said Zander. "Motorola continues to deliver compelling products and solutions to our customers, who are embracing our vision of seamless mobility."

On the postclose conference call, Zander said there were some challenges in the quarter, namely supply constraints on some new devices. The bottlenecks meant the company could not fill all the orders for new phones. "That will not be a problem" in the future, Zander said on the call with analysts.

"They appeared to be having trouble getting the Slvr and Pebl out the door to customers," says Moors & Cabot analyst Matt Hoffman, referring to two new handsets Motorola is rolling out to capitalize on the popularity of its Razr phone. "It was late in the fourth quarter before they were really out there in high commercial volumes with those two new phones."

Later, Zander was asked if thin phones from rivals will dilute the Razr's popularity. The exec said he doesn't see much of a threat.

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"2005 was the year of the Razr, and I think the year 2006 will be more Razrs," said Zander.

The news comes on the heels of a welter of soft reports from around tech, ranging from


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Motorola rose 96 cents in regular trading Thursday to $24.30 before dropping back to $22.97 in postclose action.