IQ, Know you are asleep as I post this but here is MOT's earnings report.
newsalert.com
<Motorola Reports Higher Sales and Earnings
Business Wire - January 12, 1998 18:02
SCHAUMBURG, Ill.--(BUSINESS WIRE)--Jan. 12, 1998--Motorola, Inc. today reported higher sales and earnings for both the full year and fourth quarter of 1997.
Sales for the full year rose 7 percent to $29.8 billion from $28.0 billion in 1996. Earnings were $1.18 billion, up from $1.15 billion a year ago. Earnings per share (diluted) were $1.94, compared with $1.90 per share in 1996.
The 1997 earnings include special charges of $306 million before taxes, equivalent to 32 cents per share after taxes, resulting primarily from restructuring decisions to exit several unprofitable businesses that no longer had long-term strategic value to the corporation. Special charges in the previous year, 1996, totaled $136 million before taxes, equivalent to 15 cents per share after taxes. Excluding special charges in both years, 1997 earnings would have been $1.38 billion, or $2.26 per share, compared with $1.24 billion, or $2.05 per share in 1996.
Fourth quarter sales were $8.3 billion, up 8 percent from $7.7 billion in the fourth quarter of 1996. Earnings, including the special charges, were $321 million, compared with $238 million a year earlier.
Earnings per share (diluted) were 53 cents, compared with 39 cents a year ago. The 1997 earnings include special charges of $110 million before taxes, equivalent to 12 cents per share after taxes. Special
charges in 1996 totaled $183 million before taxes, equivalent to 20 cents per share after taxes. Excluding these charges, fourth-quarter earnings would have been $393 million, or 65 cents per share, compared
with $357 million, or 59 cents per share in the fourth quarter of 1996.
Net margin on sales was 4.0 percent in 1997, compared with 4.1 percent in 1996, while in the fourth quarter, net margin was 3.9 percent compared with 3.1 percent a year earlier. Excluding special charges,
these margins for the full year would have been 4.6 percent versus 4.4 percent in 1996, and 4.8 percent for the fourth quarter of 1997 compared with 4.7 percent a year ago.
Robert L. Growney, president and chief operating officer, said, "At the end of 1996 we initiated a process of discontinuing programs that had not lived up to their promise and exiting non-strategic businesses. We have now completed that process. A number of important strategic decisions have been implemented
which should have positive impact on the corporation's long-term profitability. In the short term however,
these decisions necessitated special charges which resulted in minimal earnings growth in 1997. Excluding these charges, earnings grew at over one and one half times the rate of sales growth for the
full year. During the fourth quarter, the deterioration of economic conditions in certain Asian markets had an impact in terms of slowing the growth of sales, orders and profits, as well as putting pressure on pricing," he said.
Growney reviewed the following results of Motorola's major operations compared with 1996:
Cellular Products Segment
For the year, segment sales increased 10 percent to $11.9 billion, orders increased 9 percent and segment operating profits were higher.
For the fourth quarter, sales increased 18 percent to $3.6 billion, orders were flat, and operating profits were higher.
Cellular Subscriber Sector (CSS) sales increased in the fourth quarter in Europe and Pan America, while they declined in Asia. Orders also increased, led by Europe and Asia, while they were unchanged in Pan
America.
Motorola's MicroDigital M75 cellular telephone for Time Division Multiple Access (TDMA) systems became commercially available. The phone weighs as little as six ounces. In Japan, Motorola announced
availability of the world's smallest Personal Handyphone Systems (PHS) phone. Using digital microcellular technology, the phone can switch automatically from being a home cordless phone to a mobile phone
within the PHS public network. CSS also announced that it would be the first company in the industry to offer its visually impaired customers Braille manuals, large print manuals and audiotape manuals.
Cellular Infrastructure Group (CIG) sales were higher, led by significant increases in Japan and in the Pan American region. Sales also were higher in the rest of Asia, but were significantly lower in Europe. Orders declined, as higher orders in the Pan American region were offset by lower orders in Europe and Japan and significantly lower orders in the rest of Asia.
CIG was awarded a $260 million contract to deploy a Code Division Multiple Access (CDMA) system throughout Israel, and received a contract for a $30 million CDMA system in the U.S. Installation of
China's first CDMA system in Beijing was completed. CDMA-based wireless local loop, or WiLL(r), system contracts were received in Indonesia and Kuwait.
CIG won contracts to expand existing Global System for Mobile Communications (GSM) networks in China, Sweden and Turkey, and received contracts worth more than $160 million to expand analog
systems in three Chinese provinces.
Semiconductor Products Segment
For the year, segment sales increased 2 percent to $8.0 billion, orders were up 17 percent and segment operating profits were lower, due to a special charge taken in the second quarter related to the decision to phase out of participation in the Dynamic Random Access Memory market. Excluding this charge, operating profits increased.
For the fourth quarter, sales were up 11 percent to $2.1 billion, orders rose 10 percent, and the segment had an operating profit compared with a loss a year ago.
Order growth in the quarter was highest in Europe, followed by the Americas, Japan and the rest of Asia. Among major market segments, orders were higher in communications, industrial, automotive, consumer
and distribution. Computer orders were lower.
The sector announced an agreement with Sarnoff Corp. under which Motorola will produce chips for high-definition television (HDTV) and other consumer entertainment products. With NDS Broadcast Systems and Alps Electric (UK) Ltd., the sector completed development of a chip set for the European Digital Terrestrial Television market.
The sector introduced the M-CORE(tm) microRISC 32-bit reduced instruction set computer architecture tailored for cost-effective, ultra low-power consumer, transportation and industrial products. Motorola and Mitsubishi finalized an agreement that will allow both companies to market system solutions with Motorola's ColdFire(tm) embedded microprocessor and memory functions on a single chip.
Land Mobile Products Segment
Segment sales for the year rose 23 percent to $4.9 billion, orders increased 27 percent, and operating profits were higher.
Fourth-quarter sales rose 16 percent to $1.5 billion, orders were 36 percent higher, and operating profits declined.
Orders in the quarter for iDEN(r) subscriber and infrastructure radio equipment were higher, primarily due to orders received from Nextel Communications, Inc. as it continues the rollout of its nationwide
integrated digital enhanced network in the U.S. and from Nextel International, Inc. for various markets abroad. A contract valued at more than $40 million was received from J-Com Company, Ltd., to expand
the iDEN system it operates in Japan.
Orders in the rest of the sector also increased. Major awards for new ASTRO(r) digital systems and system expansions were received in the District of Columbia, Florida, South Carolina, Tennessee, Mexico
and the Province of Manitoba in Canada. Other key system orders were received from public safety and utility customers in Illinois, Louisiana, Utah, Brazil, Colombia and Mexico, while major radio equipment orders were received in China, Indonesia, and the Netherlands.
Motorola's TalkAbout(tm) and Spirit(tm) series of consumer two-way radios now can be purchased in the U.S. at more than 13,000 retail locations as well as through catalogs. The sector launched the
TalkAbout radio in Taiwan, representing Asia's first Family Radio Service (FRS) two-way radio.
The Smartcard Systems Business announced its initial M-Smart(tm) series of products including a combination contacted/contactless smartcard and two new families of terminals developed for public
transit and campus/ID markets. The business also announced a letter of intent to enter a global marketing alliance with ERG Ltd., a transit fare collection provider based in Australia.
Messaging, Information and Media Segment
Segment sales for the full year declined 4 percent to $3.8 billion, orders declined 12 percent and operating profits were lower as a result of a greater level of special charges related to business restructuring.
Fourth-quarter sales declined 3 percent to $848 million, orders were up 1 percent, and the segment had a larger operating loss than a year ago, due to a restructuring charge related to the planned exit from the retail analog modem business.
Orders in the quarter increased in the Messaging Systems Products Group (MSPG) and in the Multimedia Group (MMG), while they declined in the Information Systems Group (ISG) because of weakness in the
low-end modem market.
MSPG sales and orders in the quarter were higher in the North American Paging Subscriber Division versus depressed levels a year ago. Management believes North American paging operators are continuing
to monitor inventory levels closely in order to improve their financial positions and cash flow. Management also believes that sales by operators to consumers in North America continued to grow.
MSPG sales and orders in Asia were significantly lower than a year ago and pricing pressures increased. These conditions are expected to continue into the first quarter of 1998.
In the U.S., CONXUS Communications deployed an advanced voice paging service in Washington, D.C. and South Florida. It uses Motorola's voice pagers and InFLEXion(r) protocol-based infrastructure.
Carriers in China and Taiwan signed contracts for infrastructure using Motorola's FLEX(tm) one-way messaging protocol.
ISG announced a 56 kilobit host-based software modem that enables manufacturers and users to keep pace with the latest communications technology. Sales increased significantly for frame relay, as well as
cable-based voice and data products. MMG introduced the CyberSURFR(r) Wave second-generation cable modem that will double the throughput of upstream channels to 1.5 megabits from the current 768 kilobits. The group also announced an agreement with Lyonnaise Cable for the use of CyberSURFR modems in its Paris system.
Automotive, Energy and Components Sector
For the year, sector sales increased 12 percent, orders were 12 percent higher, and operating profits were higher. The sector's results are reported as part of the "Other Products" segment.
In the fourth quarter, sales rose 17 percent and orders were 13 percent higher and operating profits
increased.
In its automotive business, the sector was awarded an engine control module program by a German car manufacturer, which also awarded its North American Telematics business to the sector. Telematics
includes products for remote security and information services.
The power electronics business introduced a battery charger for Motorola two-way pagers.
Space and Systems Technology Group
Group sales for the year declined 2 percent, orders were 21 percent higher than a year ago and operating profits were lower, as anticipated due to planned Iridium activity. Results are reported as part of the "Other Products" segment.
In the fourth quarter, sales decreased 36 percent and the group recorded an operating loss compared to a profit last year. Orders were up 120 percent versus the year ago quarter due to the timing of recording
orders from the Iridium program.
The group successfully launched 12 IRIDIUM(r) satellites in the fourth quarter, bringing the total number of satellites in low earth orbit to 46 and setting an industry record for the number of satellites deployed in an eight-month period. Additional testing of paging and telephony functions through orbiting satellites continued successfully. System testing will continue until the start of commercial service, expected at the end of September 1998. As previously reported, Iridium LLC may require additional financing, possibly by the second quarter of 1998, to continue to make contractual payments to Motorola.
The group also designed and developed the tracking, telemetry and control deep space transponder for the Cassini mission to Saturn.
Motorola Computer Group
Group sales for the year declined 1 percent and orders were 1 percent higher. The operating loss was larger than in 1996 largely because of special charges, which in the third quarter related to the decision to
exit the MacOS(r)-compatible computer systems business. Results are reported as part of the "Other Products" segment.
In the fourth quarter, sales declined 27 percent and orders were down 16 percent, as last year's results included significant shipments of MacOS-compatible computers. The ongoing embedded computer product business had a 26 percent increase in sales and a 30 percent increase in orders. The group had an operating profit compared with a loss in the year-ago quarter.
As a result of the acquisition of Pro-Log Corp., the group now offers single board embedded computers based on CompactPCI(r) bus architecture and Intel's Pentium(r) processor, in addition to its
PowerPC(tm) product line. The group announced two new Pentium(r) processor-based motherboards for use in embedded computing applications.
General Corporate
Manufacturing and other costs of sales were 67.8 percent of sales in the fourth quarter, versus 67.6 percent in the year-earlier period. For the full year, manufacturing and other costs of sales declined to
67.1 percent of sales versus 67.9 percent in 1996.
Selling, general and administrative expenses were 18.6 percent of sales in the fourth quarter, versus 19.2 percent in the year-earlier period. For the full year, selling, general and administrative expenses were 18.5 percent of sales, compared with 16.9 percent in 1996, with the increased percentage primarily attributable to the higher level of special charges and greater investment in strategic programs.
Depreciation expense and interest expense each declined as a percent of sales, both for the fourth quarter and full year.
The tax rate for the year ended 1997 was 35 percent, compared with 35 percent in the prior year.
Review and Outlook
Christopher Galvin, chief executive officer, said 1997 was "a year of significant renewal for Motorola that included management changes, discontinuing programs that did not live up to their promise, exiting
non-strategic businesses and beginning a new low earth orbit satellite industry. We believe these actions set the stage for long-term growth."
Galvin said, "We are still facing challenges in the near term, as we expect the economic conditions in certain markets in Asia that affected fourth-quarter results to continue for at least the first half of 1998. We are assuming the cooperative efforts of many nations and the International Monetary Fund will help to stabilize the Asian situation. Largely for this reason, sales growth in both the first and second quarters of 1998 is estimated to be in the range of 10 percent compared with the year-ago quarters. We will continue to control costs, but we will also continue our investments in Asia where appropriate, as well as our strategic investments in technology. Moreover, Motorola's manufacturing presence in Asia should help
lessen the impact of expected lower economic growth and greater pricing pressures from the region.
"Despite the current conditions in Asia," Galvin said, "the region continues to represent a solid long-term growth opportunity for Motorola. The economic restructuring that is occurring in countries such as Korea should help to promote sustained growth in the future. Growth in Latin America remains very strong. We see continued steady expansion in the United States. Growth in Europe is accelerating. We
remain confident that Motorola is building the foundation for profitable growth in the years to come," he said.
Business Risks:
The statements contained in the "Review and Outlook" section and about the continuation of sales and order weakness and increased pricing pressure for products, the planned exit from the retail analog
modem business, deployment and commercialization of IRIDIUM(r) products and services, Iridium LLC financing requirements and any other statements that are not historical facts are forward-looking and
involve risks and uncertainties. The outcome of various efforts to stabilize economic conditions in Asia; the potential that the weak economic conditions in Southeast Asia could spread to countries where
Motorola does a sizable amount of business, including China and Japan; unforeseen expenses in connection with Motorola's decision to depart from various businesses; pricing pressures or a change in the demand for products; product and technology development and commercialization risks and uncertainties; unforeseen expenses relating to the development and commercialization of IRIDIUM products and services; availability of financing for Iridium LLC; the success of strategic decisions to improve performance; the ability of Motorola to contain costs and charges against earnings as a result of any actions taken to improve performance; steady growth in emerging markets; and the factors in Motorola's 1996 Form 10/K-A on pages 14 and 15 of Item 7 and in other SEC filings could cause Motorola's actual results to differ materially from those stated in this announcement. > |
