Motorola earnings to be barometer for tech industry
By Yukari Iwatani
CHICAGO, April 6 (Reuters) - When Motorola Inc
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. , the world's largest mobile
phone maker, and No. 3 mobile phone maker Ericsson
, 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. reported a negative
cash flow due to operational missteps.
REUTERS
Rtr 15:55 04-06-01 |
