Motorola Wants Partner for Unit
May 6 9:13pm ET
By Ben Klayman and Yukari Iwatani
ROSEMONT, Ill. (Reuters) - Wireless technology giant Motorola Inc. said on Monday it wants a partner for its wireless infrastructure business, as Motorola works to return to profitability in the third quarter.
"It's very clear that we'd like to be partnered closer to somebody that has the switch or the core of the network," Edward Breen, the Chicago area-based company's president and chief operating officer, said at the annual shareholders' meeting of the unit.
"We'll not be out if we don't get a partner though we'll have a tougher period," he told about 600 investors at a theater in a Chicago suburb.
Breen said Motorola will take its time to make the right decision concerning the unit, which reported a $1.4 billion loss last year.
Over the past year, Motorola has reportedly talked with Canada's Nortel Networks Corp. and Germany's Siemens AG to sell or link its wireless infrastructure equipment unit with another company's.
Motorola previously has said it is talking with everyone in the industry, but declined to give further details.
Breen also said on Monday that Motorola expects to finish taking one-time charges for its restructuring in the next three to five months.
NO GOOD NEWS IN INFRASTRUCTURE
Analysts and investors, however, want Motorola out of that business, not partnering with someone and spending money that would better be invested elsewhere.
"They need to get plain out of that business," said Steve Mygrant, portfolio co-manager of Fifth Third Technology Fund, which owns Motorola shares.
J.P. Morgan analyst Edward Snyder agreed: "There's been no good news in infrastructure for some time and it's only gotten worse. We want to see them get out of the business, either sell it or cut it. Don't (form a joint venture) or bleed it out.
"It really indicates Motorola will pour good money after bad," he added.
With the global wireless infrastructure market struggling, most analysts believe a consolidation will whittle the numbers down to four or five major players, with two definitely being Sweden's Ericsson and Finland's Nokia .
Analysts have said that Motorola, Siemens, Lucent Technologies Inc. , France's Alcatel and South Korea's Samsung Electronics Co. Ltd. <05930.KS> are among the weaker players in the sector.
SPENDING DECLINING
The pressure has intensified on the entire industry as customers cut spending, analysts and company officials have previously said.
Motorola, Ericsson and others have said the global wireless infrastructure market will fall as much as 10 percent this year. Last year, global sales fell 5 percent to $55 billion.
Ericsson and Nokia are feeling less pressure as they have been winning most of the 3G, or third-generation, contracts, analysts said. With research expenses so high, it's only natural that companies may seek to cut costs by combining.
Ericsson has 30 percent and Nokia 13 percent of the global wireless infrastructure market, according to technology market research firm Yankee Group. They are followed by Motorola (12 percent), Lucent (11 percent), Nortel (10 percent), Siemens (7 percent) and Alcatel (3 percent).
Breen said a company has to be one of the top three, if not top two players in the sector, and it would take research and development spending to get there.
"As we move into the 3G world, most of the initial awards are going to go to the players that can supply the end-to-end network," he said.
Motorola's shares have fallen more than 75 percent from a peak of $61.54 in March 2000 on the New York Stock Exchange. Since hitting a low of $10.50 about a year ago, the company's stock has settled at around $15, and closed trading before the meeting on Monday down 45 cents, or 3 percent, at $14.44.
Motorola Chairman and Chief Executive Christopher Galvin repeated on Monday that the company expects overall sales this year to fall 5 percent to 10 percent from last year, and the company should return to profitability in the third quarter and for the entire year. Motorola reported a net loss of $449 million in the first quarter. |
