Hopes of a strong rebound in US corporate earnings in the third quarter were boosted yesterday as Motorola, the communications and semiconductor group, easily beat analysts' forecasts and said the business environment "seems to have stabilised".

"The tax and low interest rate economic stimulus appears to be enhancing the prospect for slow but emerging growth," said Mr Chris Galvin, Motorola chairman and chief executive, who last month announced plans to resign from the group amid disagreements with the board over the pace of its restructuring.

Motorola's earnings increased to $116 million (€99 million) from $111 million on a 5 per cent rise in sales to $6.8 billion. The improvement was led by an 8 per cent rise in sales to $2.9 billion in its core handset division, driven by strong US demand. Motorola employs 500 staff in the Republic in a research facility in Cork.

Handset shipments jumped 19 per cent to 20.2 million units, while orders improved by 44 per cent to $3.7 billion.

However, as a result of low-cost competition from China and the inventory overhang following the outbreak of SARS, Motorola said the average selling price of handsets had dropped, leading to a 27 per cent decline in operating earnings to $165 million from $225 million, excluding special items.

Last week, in a move long advocated by analysts, Motorola announced plans to establish its struggling chip division as a separate operation. In the third quarter the unit returned to losses of $76 million after generating earnings of $13 million a year ago. Sales fell 4 per cent to $1.2 billion.

Motorola's global telecoms solutions division unit returned to profitability, reporting earnings of $61 million against losses of $22 million a year ago.

The decision to bring the results forward a day came in response to a downgrade on Friday by Moody's, which warned that Motorola's efforts to restore revenue growth and profitability would remain challenged.