Motorola, which employs more than 550 Irish staff, warned yesterday that sales and earnings for 2003 would be lower than it had expected because of the SARS outbreak and competition from Chinese rivals.

Shares in the world's second- biggest mobile phone firm fell 4 per cent following the news, which follows a recent statement that said the impact from SARS, or Severe Acute Respiratory Syndrome, was worse than expected.

Analysts said Motorola in particular was hurt because it had the largest share of the mobile phone market in China, where SARS has hit the hardest.

"It just means that the recovery is going to take longer and it becomes a lot less certain," said Sanford C. Bernstein analyst, Mr Paul Sagawa. "The Chinese market would be weak even if SARS had never happened. It's just the icing on the cake."

Ahead of last month's annual shareholders' meeting, many analysts said the 2003 estimates would eventually have to be cut.

SARS has killed some 700 people worldwide and hit a wide range of businesses by cutting into spending in Asia.

Analysts also expect Motorola's larger rival, Finland's Nokia, to cut its financial outlook for the same reasons when it provides a quarterly update later today.

China accounted for about 14 per cent of Motorola's sales last year, and the company has large manufacturing operations there.

Motorola, based in the US state of Illinois, said it now expected net income of about two cents per share for the second quarter. Excluding one-time items, it said it should about break even. Sales should be $6-$6.2 billion (€5.1-€5.3 billion) in the second quarter.

Motorola said full-year sales and earnings would also be lower, and it would provide details next month.

In addition to SARS, stiff competition from Chinese cell phone rivals is hurting sales.

Motorola previously forecast second-quarter sales of $6.4-$6.6 billion and net earnings of one-three cents per share. It expected earnings excluding items of three-five cents a share.

The company said cell-phone sales in the rest of the world were meeting expectations for the second quarter.

Motorola said its semiconductor division had also been hurt by SARS, while its chip plant in Sendai, Japan was damaged in May by an earthquake that disrupted manufacturing.

Motorola said the timing of a return to "normal conditions" in Asia was "uncertain," but that it believes it will occur as SARS is brought under control.

Analysts were expecting second-quarter earnings before items of four cents a share on sales of $6.4 billion.

Motorola employs more than 550 people at a software development centre in Cork.