Motorola 4th-Qtr Profit Falls on Rising Phone Costs
from Bloomberg
By John Stebbins
Schaumburg, Illinois, Jan. 10 (Bloomberg) -- Motorola Inc., the No. 2 maker of cellular phones, said fourth-quarter earnings fell because of higher manufacturing expenses in the company's mobile-phone unit and slowing growth in semiconductor sales.
Profit from continuing operations fell 41 percent to $335 million, or 15 cents a share, from $564 million, or 25 cents, a year earlier. Revenue rose 11 percent to $10.06 billion from $9.06 billion, Motorola said.
Sales and earnings were in line with reduced targets the company set last month. Operating profit in Motorola's cell-phone unit dropped 69 percent as manufacturing costs increased and sales were little changed. At the same time, chip sales increased just 7 percent, compared with a 30 percent rise in the third quarter, as slowing economic growth caused customers to curb orders.
``They told us not to expect anything decent, and they didn't give us anything decent,'' said David Katz, chief investment officer at Matrix Asset Advisors Inc., which owns 371,000 Motorola shares. ``There were no surprises.''
Motorola has been losing share in the mobile-phone market to No. 1 Nokia Oyj. Yesterday, Nokia said the cell-phone industry sold 405 million phones last year, less than some analysts and the company's rivals expected. Nokia, whose phonemaking business is more profitable than Motorola's, sold 128 million phones as it took market share from Motorola and Sweden's Ericsson AB.
Motorola and Ericsson had forecast that as many as 420 million phones would be sold industrywide. Motorola didn't provide details on cell-phone unit sales in its earnings report today.
The company will hold a conference call on fourth-quarter results and give an industry and company outlook tomorrow at 8 a.m. New York time. The audio broadcast and replay are available at the company Web site: motorola.com.
The shares of Schaumburg, Illinois-based Motorola rose 50 cents to $21.19 on the New York Stock Exchange before the report. It reached $22 in after hours trading on Instinet. The stock has declined 66 percent from a record $61.55 on March 7.
Cell Phone Orders Fall
Sales in the company's division that makes cell phones and pagers rose 1 percent to $3.5 billion, and orders fell 20 percent to $2.9 billion. The company said wireless-phone orders in Europe, where it competes head-to-head with Finland's Nokia, were ``down very significantly'' and sales were ``down significantly.'' In the Americas, orders increased and sales were ``significantly higher.''
Nokia's share of the worldwide handset market rose in the third quarter of 2000 to 30.6 percent from 27.5 percent in the second quarter. Motorola's share fell to 13.3 percent from 15.6 percent.
To cut production costs, Motorola has hired so-called contract manufacturers to build more of its cell phones and pagers. Last month, it hired Celestica Inc. to build more than $1 billion of communications equipment over three years and said it would cut about 2,870 jobs.
``We began implementing cost reductions in the third and fourth quarters of 2000, and will continue with additional actions to be taken in the first quarter of 2001,'' Motorola Chairman and Chief Executive Christopher Galvin said in a statement.
Semiconductor Orders Slide
Semiconductor sales rose to $1.9 billion, though orders declined 19 percent to $1.6 billion, reflecting a worldwide slowdown in chip sales. Operating profit in the unit almost doubled to $158 million from $80 million a year ago.
Global semiconductor sales rose 31 percent in 2000, down from a prior estimate of 37 percent, market researcher Dataquest Inc. said last week. Motorola said that fourth-quarter chip orders declined in all regions.
Orders for semiconductors used in imagining and entertainment gear were ``significantly higher,'' the company said. Orders dropped in transportation and were ``significantly lower'' in wireless and standard products. Chips used in telecommunication networks and in computers rose, the company said.
General Instrument
Motorola is the No. 1 maker of TV set-top boxes and cable modems the allow high-speed Internet access. In the Broadband Communications unit, which sells TV set-top boxes and cable modems, sales increased 52 percent from a year ago to $1.1 billion and orders rose 49 percent to $1.1 billion. Operating profit increased to $156 million from $95 million a year earlier.
Year-ago results were restated to reflect the company's January 2000 acquisition of General Instrument Corp., a TV set-top box maker, for $17 billion. The company split its stock 3-for-1 in June.
Per-share profit in the recent quarter matched the average forecast from analysts polled by First Call/Thomson Financial. Before two revisions in the company's outlook -- one in December and the other in October -- the average analyst profit estimate had been for 37 cents, according to First Call.
Including gains related to the sale of investments and charges for firings and discontinuing some wireless-phone products, net income in the recent quarter was $135 million, or 6 cents a share, Motorola spokesman George Grimsrud said. The company didn't give details about the gains and charges.
In the fourth quarter of 1999, gains and charges totaling $242 million, or 10 cents a share, reduced net income to $323 million, or a split-adjusted 15 cents. The company took a charge in that quarter relating primarily to a reserve involving its satellite venture, Iridium LLC, Grimsrud said.
Best Regards, J.T. |
