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Motorola Q3 beats views
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October 6, 1997: 8:41 p.m. ET
High-tech giant reports 59 percent jump in operating profits
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NEW YORK (CNNfn) - Motorola Inc. said late Monday that earnings from operations rose 59 percent in the third quarter, pleasantly surprising many investors on Wall Street.
In a statement issued after the market close, the Schaumburg, Ill.-based communications and chip giant reported net earnings totaled $266 million, or 44 cents a share, compared with $206 million, or 34 cents a share, a year earlier.
Sales rose 13 percent to $7.4 billion.
The latest results included a pretax charge of $95 million (equivalent to 10 cents a share after taxes), as a result of its previously announced plans to exit the Macintosh-compatible computer systems business. Excluding the special charge, earnings would have been $328 million, or 54 cents a share -- 1 cent above analysts' consensus estimate.
The better-than-expected results were "paced by growth in semiconductors, land mobile products and cellular subscriber products," said Robert L. Growney, president and chief operating officer.
Shares of Motorola (MOT) jumped in after-hours trading, climbing to 73 on the Instinet system after closing at 71 on the New York Stock Exchange.
Yet, not everyone in the financial community was impressed with the latest results.
"My attitude is: it's about time they start doing things about their overhead and costs," said Roger McNamee, general partner of Integral Capital Partners.
"We are continuing the process, which we initiated at the end of 1996, of reviewing businesses and development programs that have not lived up to expectations," Growney said.
Motorola said continual review of its businesses and product lines "may result in additional pretax charges of up to $100 million against earnings in the fourth quarter."
Among the divestments include the low-end modem business based in Huntsville, Ala. The company has retained an investment banker to explore possibilities including the sale of the operations.
"Motorola to me in some ways is a very disappointing company," McNamee said. "I'm moderately optimistic about the stock here but I don't see the value here that I would like to see to be an aggressive buyer." (156K WAV) (156K AIFF)
As for the current fourth quarter, Motorola said sales growth is anticipated to be below the 13 percent realized in the third quarter. However, profitability will likely to improve.
"There have been periods in Motorola's history, including the early 1990s, when the sales growth rates and profitability of certain of our individual businesses were out of phase with each other," said Christopher B. Galvin, chief executive.
"These periods resulted in improving sales growth and profits for Motorola in total, but at less robust levels than desired. It is likely the company will be in a similar circumstance in the fourth quarter of 1997," he concluded.
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Motorola
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