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Motorola issues warning
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March 5, 1998: 6:39 p.m. ET
Company says Asian turmoil will drag down first-quarter profits
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NEW YORK (CNNfn) - One day after Intel Corp. stunned investors with a profit warning, Motorola Inc. issued its own gloomy forecast Wednesday, telling investors first-quarter profits will fall well below expectations because of economic turmoil in Asia.
The semiconductor and communications equipment manufacturer said the division that designs semiconductors and integrated circuits used in microprocessors, digital signal processors, memory and other products, would be hardest hit.
Motorola said although it sees some signs that Asia's troubles are easing, it is difficult to forecast when an economic recovery will begin. However, the company still believes Asia's long-term prospects look good.
"Motorola remains fully committed to its long-term prospects in Asia and is taking cost and capital spending control measures in the short term," the company said.
Analysts surveyed by First Call had predicted a profit of 47 cents. The company earned 53 cents a share in its 1997 first quarter.
Motorola (MOT) issued the warning after the market had closed. However, in after hours trade shares of the Shaumburg, Ill.-based company dropped to 51-1/2 from the earlier close of 55-7/8.
Motorola's warning comes one day after Intel, the world's largest semiconductor maker, sent a bombshell through the technology sector by warning first quarter revenues would be down 10 percent to $5.85 billion and profits would fall short of analysts' estimates. Intel plunged 10-15/16, or 12.6 percent, to 75-1/2, wiping out nearly $19.5 billion from the company's market capitalization.
Officials said the semiconductor products unit's consumer systems and components groups have been hurt by softened demand in Asia and increased price pressures in most other regions.
While sales in its cellular infrastructure group, which designs and manufactures cellular-based radio, satellite and personal communications systems, remain sold in Japan and much of the world, business from Asian currencies affected by currency devaluations is off significantly.
Orders in the company's paging business were also held down by Asia's troubles.
The bright spot is the cellular subscriber sector, which designs and manufactures a variety of cellular telephones.
Motorola said that sector "continues to experience positive momentum in the sales of its digital handset products."
However, sales of analog phones are declining in the United States since more customers are demanding digital phones that are compatible with new personal communications services, or PCS, systems.
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Motorola
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