http://story.news.yahoo.com/news?tmpl=story2&u=/nm/20030108/tc_nm/telecoms_china_motorola_dc Motorola Expects Bright Year for Handsets By Edwin Chan SHANGHAI (Reuters) - Motorola Inc., the world's number two mobile phone maker, is poised for a turnaround in 2003 after battling an industry meltdown over the past two years, helped by a pick-up in the handset market, its president said on Wednesday. Mike Zafirovski, also Motorola's chief operating officer, said he expected industry sales of handsets -- the bulk of Motorola's business -- to jump eight to 10 percent in 2003 after slack growth last year. And all of the company's business divisions -- from semiconductors to wireless infrastructure -- would yield profits this year after aggressive cost cutting and hefty layoffs since 2000, Zafirovski told Reuters in an interview. "The past two and a half years have been very painful. We're starting to see some of the positive results," he said barely six months after stepping into his present role from heading the company's main mobile devices division. "It's safe to say all six businesses would be both cash flow and profit generating in 2003," said the man known as "Mike Z," in Shanghai to launch a range of phones for 2003. Motorola posted a third quarter net profit in October, snapping six straight quarters of net losses. But it trimmed its fourth quarter earnings estimate to 10 cents a share before one-time items, from 14 cents, blaming slowing demand in several businesses including semiconductors and high-speed Internet and wireless equipment. The mobile phone division, which produced 40 percent of the wireless titan's $29.5 billion in sales in 2001, has been gaining market share steadily as the industry as a whole recovers from its worst-ever year in 2001. SAMSUNG LOOMS Zafirovski estimated the industry sold 390 million handsets in 2002, in line with predictions by rivals such as Nokia (news - web sites), the world's largest mobile phone vendor. Analysts estimated that was up a year-on-year 1.8 percent after a decline of about three to four percent in 2001 that followed years of runaway growth. But they said Motorola's number two ranking in the mobile handset arena was coming under attack, particularly from up-and-coming rival Samsung Electronics Co. Samsung leapfrogged into the world number three slot in 2002, accounting for an estimated 10 percent of all handsets sold, racking up strong sales of innovative color-screen models. Zafirovski would not predict whether Motorola, due to announce fourth-quarter results on January 22, could fend off Samsung and build on its 15 percent share of the market. But Zafirovski -- known for jogging in oppressive heat and sleeping only five hours a night -- said Motorola was not unduly worried about the South Korean mobile phone maker. "We respect competition," he said. "With no disrespect to Samsung or anybody else, we're not paralyzed. We're energized by the opportunities which we have." Those included seizing the number one spot in North America from Nokia and re-establishing Motorola's dominance in its home market -- which would happen "soon," Zafirovski said. "When that happens, we'd celebrate for two seconds and move on," he said. "We don't like the fact that for something which we had invented, we're not a strong number one." In contrast to the galloping handset business, Zafirovski said the industry was likely to buy less wireless infrastructure in 2003 than in 2002, compounding the woes of a division that lost $1.4 billion in 2001 and has long been deemed a takeover target. NO TALKS WITH SIEMENS Siemens AG (news - web sites) -- which has an agreement with Motorola to license third-generation handsets -- said in October it was in talks with the U.S. firm on possible infrastructure cooperation. But Zafirovski said Motorola was no longer talking to Siemens. Industry sources had speculated the U.S. firm might sell or swap its networking division for Siemens' handset business, which ranks a distant fourth in the world. "We're not having discussions with Siemens today," he said, when asked if Motorola would offload its network division. But the executive did not rule out a tie-up if the market took a turn for the worse. The chip and wireless divisions broke even in the third quarter of 2002. "There's no sacred business in Motorola ... Each business will have to be earning a cost-adjusted return on capital. There's no exceptions," Zafirovski said. "They either need to be at those levels in 2004 or 2005, or some very significant actions will be taken by that point." Motorola's shares fell 0.1 percent to $9.69 on Tuesday in New York.