Motorola earnings to be barometer for tech industry
By Yukari Iwatani
CHICAGO, April 6 (Reuters) - When Motorola Inc (NYSE:MOT - news) reports earnings for
the first quarter next Tuesday, investors will assess the health of the struggling technology
sector and search for clues that the month of March held the seeds of a turnaround.
``It really sets the tone for the rest of earnings. They (Motorola) are involved
in so many different industries, it's a good indicator,'' said Matthew Hoffman,
wireless equipment analyst for Wit Soundview.
Motorola, the first major technology firm to report on the latest quarter, has
already issued two warnings for the period and analysts expect more bad
news.
According to Thomson Financial/First Call, analysts are expecting Motorola to
report a first quarter loss ranging from a penny to 14 cents, compared with a
profit of 20 cents last year. Motorola has indicated that first quarter sales will
fall short of the $8.8 billion achieved a year ago.
Motorola, the world's second-largest mobile phone maker, is the first of the
Big Three phone makers to report results. Nokia Corp. (NYSE:NOK - news)
, the world's largest mobile phone maker, and No. 3 mobile phone maker Ericsson (NasdaqNM:ERICY - news), are scheduled to
report their earnings on April 20.
Both companies have also issued warnings for the first quarter, citing a slowdown in sales.
RESULTS COULD BE THE WORST IN 16 YEARS
``This will probably be the worst quarter they've (Motorola) experienced in 16 years,'' said Ed Snyder, analyst with J.P. Morgan
Chase.
Nevertheless, analysts said they will be watching for any glimmer of an upturn in future guidance, or positive signals in March
results as the rough first quarter wound down.
They hope Motorola, which makes everything from semiconductors to mobile phones, can shed light on how tech businesses are
doing amid a worsening economy. Beset by a string of earnings warnings and a loss of investor faith, technology firms have been
reluctant to speculate on their long-term financial outlook.
With Chief Executive Christopher Galvin talking about a recession, analysts are uncertain about how bad Motorola's results could
be.
``Motorola's a bit of a black box at the moment because they're laying off a lot of people and trying to reduce costs in a weak
environment,'' Lawrence Borgman, telecommunications equipment analyst with Josephthal & Co., said. ``The numbers are sort of
unpredictable at the moment.''
MARCH RESULTS ARE KEY
Tim Ghriskey, portfolio manager of Dreyfus Fund, said he would be looking in particular at Motorola's business in March, which is
typically a good month for tech companies because many deals tend to be approved as the quarter winds down.
``If they indicate that business improved toward the end of the quarter, it should be favorable for Motorola and for technology
stocks,'' he said. ``If they indicate that business deteriorated, it's another big negative sign.''
Motorola said in February it could post its first quarterly operating loss in 15 years, and it has cut about 22,000 or 15 percent of its
jobs this year to slash costs.
The string of bad news from the firm has pushed the stock down by 70 percent from a year high of $52.65 to about $15 on the
New York Stock Exchange. The stock has underperformed the S&P 500 Index by 64 percent over the past year and
underperformed rival Nokia's stock by 40 percent.
LITTLE GUIDANCE EXPECTED
Analysts said they hope to gain some insight into Motorola's outlook for semiconductors, handsets and broadband products, but
they were doubtful that the company will give much guidance beyond the second quarter.
All eyes will be watching for comments about Motorola's semiconductor and broadband businesses to glean insight about the
respective industries' current business environment.
Wit Soundview's Hoffman said he would also focus on indications of consumer acceptance for Motorola's phones in Europe based
on GPRS next-generation technology. Motorola is the only company so far that has these phones in markets.
``I think people will warm up to the story if they (Motorola) start looking like a handset leader again and one way they can do that
is through GPRS,'' Hoffman said.
Walter Casey, money manager for Bank One Investment Advisor's technology fund, said he would be focusing on the quality of
Motorola's balance sheet. The Bank One investment fund owns an unspecified number of Motorola shares.
``The question is more 'How will they be able to compete?' When the recovery comes, will they be in strong shape financially?
Will they have to sell so many assets?'' he said.
Casey said investors were jittery about the balance sheet ever since Lucent Technologies Inc. (NYSE:LU - news) reported a
negative cash flow due to operational missteps. |
