MOT ($14-16) posts Q2 loss, sees brighter future
(Recasts first paragraph, adds company comments, background,
byline)
By Ben Klayman
CHICAGO, July 11 (Reuters) - Wireless technology giant
Motorola Inc. <MOT.N> posted a $759 million net loss in the
second quarter on Wednesday, citing difficulties in the telecom
and semiconductor industries, but pointed to a brighter future
not that far off.
Its second-quarter loss, including one-time charges, of 35
cents a share compared with earnings of $204 million, or 9
cents per share, in the same period last year, the Chicago
area-based firm said.
Motorola also reported its second consecutive quarterly
operating loss, amounting to $232 million, or 11 cents a share,
excluding special items, compared with a profit of $551
million, or 25 cents a share, in the same period last year.
Shares in Motorola rose in extended-hours trading on
Wednesday after the earnings news, climbing to $16.67 from
their close of $15.67 on the New York Stock Exchange before the
announcement.
After Motorola warned in April that its second-quarter
result would be a few cents worse than the first-quarter loss
of 9 cents per share, analysts had expected it to post a
12-cent loss, with a range of a 10-cent loss to a 15-cent loss,
according to Thomson Financial/First Call.
Sales fell 19 percent to $7.5 billion from $9.3 billion
last year. Motorola, the No. 2 mobile phone maker behind
Finland's Nokia <NOK1V.HE><NOK.N>, had said in April it
expected sales to "increase somewhat" from the $7.8 billion in
the first quarter.
Motorola reported a second-quarter net charge of $496
million pre-tax, or 24 cents a share after-tax, mostly related
to various cost-reduction activities and asset impairments.
Motorola Chairman and Chief Executive Christopher Galvin
was nonetheless upbeat in statements about the company's
second-quarter performance and its future.
"We know how to manage in recessionary environments and all
businesses in Motorola will continue to be very focused on
maintaining a strong balance sheet and improving operating cash
flow," Galvin said.
He said Motorola recorded strong, positive cash flow from
operations, reduced receivables and inventories, lower total
debt and an increased cash position.
"The decline in communications equipment orders is worse
than many in the industry first believed," he added. "The
industry's fundamentals are weak and the imbalance between
inventories and demand has spilled over into Europe."
Despite the global slowdown, Galvin said Motorola's new
products are garnering attention from both its corporate
clients and consumers.
He said the company's wireless telephone business was
already showing signs of recovery and the semiconductor
industry should resume double-digit growth next year. He said
renewed demand and reduction in manufacturing capacity in both
sectors were cutting inventories, which are expected to return
to normal levels over time.
Over the past year, the company's stock has underperformed
the Standard & Poor's 500 index by about 41 percent. On the
other hand, it has outperformed a handful of competitors in the
S&P Communications Equipment index by almost 130 percent over
the same period.
Motorola, with a presence in several segments including
mobile phones and semiconductors, has not been the only telecom
company affected by the slowdown in customer spending amid the
faltering global economy.
Nokia, believed by some investors to be largely immune to
the slowdown's effects, last month issued a surprise profit
warning, saying weak global mobile phone demand slashed
second-quarter profit expectations by 15 percent to 25 percent.
It also halved its sales growth outlook for the quarter to less
than 10 percent.
Most of Motorola's broad array of businesses saw sales and
orders fall in the second quarter.
Motorola's personal communications unit, or mobile phone
and pager business, saw sales in the second quarter fall 25
percent to $2.5 billion, while orders fell 9 percent thanks to
weaker demand across the globe.
Its other major business -- semiconductors -- reported a 51
percent drop in sales to $1 billion, with an operating loss of
$381 million compared with a gain of $176 million last year.
The company blamed the global downturn for the drastic decline.
The company's telecom infrastructure unit's sales fell 14
percent to $1.7 billion, while orders declined 6 percent. The
commercial, government and industrial systems unit's sales
dropped 8 percent to $1 billion and orders decreased 4 percent.
Sales in Motorola's broadband communications, or cable
set-top boxes, rose 7 percent to $820 million, but orders fell
16 percent. The company's integrated electronic systems segment
saw sales fall 19 percent to $549 million and orders drop 21
percent.
The company also repeated its statement that it continues
to weigh its options, including legal action, involving Telsim,
Turkey's No. 2 wireless operator, which is in default on a $2
billion loan from the U.S. firm.
Motorola also repeated its intention to possibly sell its
Integrated Information Systems Group business, an Arizona-based
government communication/information technology business.
(Additional reporting by Yukari Iwatani in Chicago)
((--Chicago Equities News at 312 408 8787, |
