Wednesday July 14 1:47 AM ET,,,Motorola Profits Top Expectations
By Emily Kaiser
CHICAGO (Reuters) - Wireless communications and semiconductor maker Motorola Inc. (NYSE:MOT - news) Tuesday reported a larger-than-expected second quarter operating profit of $273 million, bolstered by strong growth in semiconductors and a recovery in Asian markets.
However, Motorola's stock fell in after-hours trading as revenues came in shy of analysts' expectations and the company warned of possible third-quarter charges related to Iridium World Communications Ltd (Nasdaq:IRID - news)., the global satellite phone company that Motorola bankrolled.
The shares were off $1.50 at $95.00 on Instinet after falling $2.50 to $96.50 on the New York Stock Exchange.
The maker of wireless phones, pagers and computer chips said it earned 44 cents a share before one-time items, well above last year's profit of $6 million, or one cent a share, which also excludes unusual items.
The earnings per share topped Wall Street expectations for 41 cents a share, according to First Call Corp., the research firm that tracks analysts' estimates.
Second quarter revenues rose to $7.5 billion from $7.0 billion in the same period last year.
''My initial reaction is they delivered the numbers, the revenues are slightly off, but I'm not panicking,'' said Wojtek Uzdelewicz, analyst with S.G. Cowen & Co. ''It's really important what they will say (Wednesday) in terms of outlook.''
Uzdelewicz said Motorola's stock may be under pressure Wednesday because of lighter-than-expected revenues. He had been looking for revenues of $7.6 billion.
Motorola recorded pretax net charges of $94 million, or 11 cents a share, including one-time gains and a charge of $126 million to write down the value of Iridium bonds that it owns. Motorola said it may take additional charges in the third quarter to cover its exposure to Iridium.
Including the charges, second quarter 1999 earnings were $206 million, or 33 cents a share, compared with a loss of $1.3 billion, or $2.22 a share, in the second quarter of 1998.
''The improved results stem from good growth in semiconductors and very significant growth in digital wireless telephones, as well as a recovery in Asian markets and the benefits of the company's profit improvement programs,'' Robert Growney, president and chief operating officer, said in a statement.
Motorola called on its partners to help bail out Iridium, which has struggled to sign up subscribers and has not been able to pay its debts.
Motorola said it, ''will not provide any further support beyond existing contractual commitments unless there is substantial participation in the Iridium LLC restructuring from all parties with significant financial interest.''
Those parties include Lockheed Martin Corp. and Raytheon Co.
''The fact that they took special charge, I don't think is a big deal,'' said Robert Wilkes, analyst with Brown Brothers Harriman. ''Companies take special charges all the time. But the potential for further charges on Iridium was made explicit.
''Iridium continues to be the single biggest uncertainty in Motorola's outlook going forward,'' Wilkes said.
Christopher Galvin, chairman and chief executive, said a recovery in Asia should help Motorola's profits going forward.
''We expect improving economic conditions throughout much of the world, led by Asia and Europe,'' Galvin said in the statement. ''In addition, the successful results of our manufacturing consolidation, cost reduction and restructuring programs have set the stage for long-term growth. Though we continue to face numerous challenges, we are pleased with our current progress.''
Here's a breakdown of results by segment:
Personal Communications -- sales up 17% to $2.8 billion; orders up 21% to $3.2 billion
Semiconductor Products -- sales up 9% to $2.0 billion; orders up 20% to $2.1 billion
Internet and Networking -- sales up 16%; orders up 49%
Network Systems -- sales were flat at $1.6 billion; orders down 7% to $1.6 billion
Satellite Communications -- "orders were down very significantly and sales were higher"
Commercial, Government and Industrial Systems -- sales down 6% to $955 million; orders up 11% to $1.2 billion
Integrated Electronic Systems -- sales down 2%; orders up 6%
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Wednesday July 14, 8:33 am Eastern Time
Motorola Says Sees 15-19 Percent Semiconductor Industry Growth in 2000
Motorola Says Still Sees 9-11 Percent Chip Industry Growth in 1999
Motorola Says Q3 Eps of $0.51, Sales of $7.8 Bln "Within Reach"
Motorola Says 1999 Eps of $2.00, Sales of $31.6 Bln "Also Reachable"
Motorola Says Sees Sales, Orders From Teledesic as Early as Q4
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Wednesday July 14, 10:58 am Eastern Time
Iridium stock off after Motorola comments
CHICAGO, July 14 (Reuters) - Shares of global satellite phone company Iridium World Communications Ltd. fell 13 percent on Wednesday after its primary backer said the financially troubled company may face bankruptcy or liquidation.
Motorola Inc. (NYSE:MOT - news), which owns about 18 percent of Iridium and has guaranteed a chunk of its debt, said Iridium had three options -- out-of-court restructuring, Chapter 11 bankruptcy protection, or liquidation.
''It is Motorola's hope that this last scenario (liquidation) can be avoided,'' said Robert Growney, Motorola's president and chief operating officer, in a conference call.
Shares of Iridium were off 1 at 7-3/16 in late morning trading. An Iridium spokeswoman could not immediately be reached for comment.
''Motorola said what was expected,'' said Timothy O'Neil, wireless telecommunications analyst with SoundView Technology Group. ''As far as Iridium is concerned, there's nothing new. This stock should not move on what Motorola says. This stock should move on whether it gets subscribers.''
That has been the key problem for Iridium, which has struggled to sign up customers for its pricey system. The Iridium network is the first of its kind to allow users to make calls from anywhere on the planet via a network of low-earth orbit satellites. Iridium's lenders have extended its credit facility three times, but analysts have said the company is likely to default.
O'Neil said Iridium needed to show some progress in increasing its subscriber base to reassure investors that it is safe to throw more money into it.
''I believe they'll get over this current hurdle,'' he said. ''It's too early in the roll-out phase and too much has been invested. (The financial backers) will give it one more shot. Management understands that there is a problem, and they've addressed the problem internally. All that has to be followed up with some sort of attraction of customers.''
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Wednesday July 14 12:36 PM ET.....Motorola Earnings Beat Expectations
By CLIFF EDWARDS AP Technology Writer
CHICAGO (AP) - Motorola Inc. (NYSE:MOT - news) benefited from a rebound in computer chip sales and its continuing rollout of new digital cellular phones in sharply boosting its second-quarter profits.
The Schaumburg, Ill.-based communications and equipment maker on Tuesday reported earnings that beat Wall Street expectations as its retooling of its businesses began to pay off.
For the three-month period ending July 3, the company reported a profit from operations of $273 million, or 44 cents a share, compared with $6 million, or 1 cent a share, in the same period a year ago.
The current quarter included a charge of $94 million, reflecting a move to prop up its 18 percent investment in the Iridium go-anywhere satellite phone project. The year-ago quarter included a charge of $1.91 billion for restructuring.
The results beat Wall Street expectations of 41 cents a share, according to a survey of analysts by First Call Corp.
Sales jumped 7 percent to $7.5 billion from $7 billion. As expected by analysts, Motorola's paging and wireless infrastructure segments remained sluggish, but the sales results reflected an overall improvement in Motorola's outlook and of the semiconductor industry in general.
Intel Corp. (Nasdaq:INTC - news) on Tuesday also reported a rebound in its computer-chip business, although its profits were below forecasts. The Semiconductor Industry Association reported last week that sales were up 11 percent in May as the Asian economy showed signs of a rebound.
For Motorola, sales of semiconductors - the chips in everything from phones to computers - jumped 9 percent for the quarter to $2 billion, while orders jumped 20 percent. That was helped by a boost in orders from all regions except Europe.
And after long delays in introducing digital wireless phones, the Schaumburg, Ill.-based company appeared to be gaining on competitors Nokia, Ericsson and Qualcomm.
The company reported orders jumped 21 percent in the quarter to $3.2 billion, helped in part by Bell Atlantic's purchase of 1 million digital StarTac phones and accompanying accessories. Sales rose 17 percent to $2.8 billion for the quarter.
The good news, however, was tempered by warnings the third quarter could be further affected by Motorola's Iridium obligations.
Those worries were reflected in a $2.25 a share decline in Motorola's stock price which was at $94.25 in afternoon trading today on the New York Stock Exchange.
The troubled company has repeatedly received extensions from its creditors as it falls well short of the amount of subscribers it had promised would be on board by earlier this year. Motorola indicated it will play a major hand in Iridium's recent efforts to restructure its business, lower costs and bring in new customers.
For the first six months of the year, operating earnings were $450 million, or 73 cents a share, compared to $147 million, or 25 cents a share, the same period a year ago. Including charges, net income was $377 million, or 61 cents a share, compared to a net loss of $1.15 billion, or a loss of $1.92 a share. |
