Motorola posts first operating loss in 15 years
By Yukari Iwatani
CHICAGO, April 10 (Reuters) - Motorola Inc. <MOT.N>, the bellwether of the technology sector, on Tuesday reported its first quarterly operating loss in 15 years, and provided the market with few clues about its prospects in a worsening U.S. economy.
"We see a continuing downturn in the U.S. economy beginning to spill over to the rest of the world," Christopher Galvin, chairman and chief executive officer, said in a news release. "The high-tech sector, which has been hard hit, is already in a recession. These issues, plus interest rate policy or energy prices, cannot be controlled by Motorola."
Motorola, the world's second-largest mobile phone maker, is the first of the Big Three mobile phone makers and the first major technology company to report on the latest quarter, which is expected to be a rocky one for the industry.
Comments by Motorola executives on a conference call with Wall Street on Wednesday morning are expected to provide guidance on the intensity and duration of the economic downturn, analysts and portfolio managers said.
"As goes those statements, so goes this stock and probably to a certain extent this little rally we've had," Tim Ghriskey, senior portfolio manager with Dreyfus Fund, said.
Some analysts hope Motorola will shed light on which businesses it may sell to become more competitive and profitable.
The Chicago-based company said it lost $206 million from ongoing operations in the first quarter, or 9 cents a share, excluding special items, compared with a profit of $481 million, or 21 cents, a year ago.
Analysts were expecting the company to report a loss between a penny and 14 cents with a consensus of a 7 cent loss, according to market research firm Thomson Financial/First Call. The wireless communications and semiconductor giant warned in February it could report a first-quarter loss if an economic slowdown persisted.
Including special charges, Motorola reported a first quarter net loss of $533 million, or 24 cents a share, compared with earnings of $448 million, or 20 cents a share. Special charges were due to cost cuts and product portfolio changes.
Revenues for the period ending March 31 fell 11 percent to $7.8 billion from $8.8 billion a year ago.
Justin McNicholas, portfolio manager with Osborne Partners Capital Management, a San Francisco asset management firm, called Motorola's results "abominable, as expected."
"We question whether they have any visibility past Good Friday (April 13), let alone next quarter or the quarter after," he said.
Motorola's rivals, Nokia Corp. <NOK.N><NOK1V.HE>, the world's largest mobile phone maker, and Ericsson <LMEb.ST> <ERICY.O>, the world's No. 3 mobile phone maker, are expected to report on their latest quarter on April 20. Both companies also have issued warnings, citing a slowdown in sales.
DECLINING SHARES
Shares of Motorola slipped to $12.83 on the Instinet electronic broker system in extended-hours trading. They closed up $1.50, or 13 percent, at $13.00 on the New York Stock Exchange Tuesday, before the earnings report. The stock has underperformed Standard & Poor's 500 Index by about 66 percent over the past year.
"I don't see anything that makes us think that this business has seen bottom yet," said Ghriskey, adding that accounts receivable and inventory look positive, but weak sales don't give him confidence.
On Friday, shares of Motorola fell to their lowest level in eight years on debt fears, before rebounding Tuesday in the exchange's heaviest trading. Stocks staged a blazing rally during the regular session Tuesday.
"I wouldn't necessarily plow back in the stock," J.P. Morgan Chase analyst Ed Snyder said. "It'll be back down again tomorrow."
The company said its cash flow was positive in the first quarter and it expects that to remain true for the full year.
Motorola has been taking aggressive-cost cutting measures in order to improve its financial performance, including the slashing of 22,000 or 15 percent of its jobs this year.
The company's personal communications unit, which makes mobile phones, reported an operating loss of $402 million versus a profit of $53 million a year ago. Sales fell 29 percent to $2.3 billion and orders fell 10 percent to $2.8 billion.
The semiconductor unit also reported an operating loss of $131 million from a profit of $128 million a year ago. Sales fell 22 percent to $1.5 billion and orders fell 47 percent to $1.1 billion.
Motorola, the world's sixth-largest chipmaker, said the results reflected a significant downturn in the worldwide semiconductor industry.
The broadband communications unit said operating profit rose to $130 million from $99 million a year ago on a 21 percent sales increase to $818 million. Orders rose 3 percent to $905 million.
Motorola's global telecom solutions unit, which makes network equipment, reported its operating profit fell to $54 million from $281 million a year ago. Sales fell 5 percent to $1.7 billion and orders fell 14 percent to $1.5 billion.
(additional reporting by Ben Klayman in Chicago)
19:45 04-10-01 |
