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Warning mauls Motorola
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September 11, 1997: 6:25 p.m. ET
Shares tumble in after-hours trading after company issues earnings warning
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NEW YORK (CNNfn) - Motorola warned Thursday that third-quarter results will fall significantly below analysts' expectations -- news that sent the company's stock on a sharp dive in after-hours trading.
Motorola is suffering because of "weakness in the world's two largest markets for paging products," the company said a statement. "In China, the paging market is experiencing a larger-than-normal seasonal downturn."
Paging retailers in the United States are also struggling with inventory problems, the company said, adding that both market weakness and inventory troubles could continue into the fourth quarter.
Motorola's stock plummeted 8-3/4 to 67 at around 5:30 p.m. - almost 12 percent off its close on the New York Stock Exchange.
Ericsson, a rival maker of pagers and cellular phones, also participated in the late-day selloff. Its stock (ERICY) slid 1-3/8 to 41-1/4 after the bell, but shares in another rival, Nokia, (NOK.A) held firm at 80.
Further revealing future problems, Motorola said it will take a one-time charge of $95 million to discontinue its Macintosh clone business.
Third-quarter results will also reflect higher costs associated with the company's flat-panel display business and Iridium satellite project. Together, the two programs will raise third-quarter expenses by about $20 million, the company said.
Wall Street analysts tracked by First Call had expected Motorola to report a third-quarter profit of 60 cents per share, up from 34 cents a year ago.
Analysts said the decision to discontinue the Mac clones made sense because Motorola did not sell enough of the machines to justify paying Apple a higher licensing fee.
"They had very few eggs in the Apple basket," said Lou Mazzucchelli, an analyst with Gerard Klauer Mattison. "I think they sold in the thousands [of units]. It wasn't a lot."
Motorola chief executive Christopher Galvin moved to bolster the company's outlook in light of the news.
"As we pointed out in our second-quarter report, Motorola is redirecting resources to development programs with the greatest potential and reviewing development programs and businesses that have not lived up to expectations," he said in a statement.
"That process is continuing, and may result in additional charges against earnings in the third or fourth quarters of the year." 
-- Will Morton
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