|
Motorola rues chip moves
|
 |
June 5, 1998: 11:04 a.m. ET
Troubled chipmaker sees 'significant' 2Q semiconductor operating loss
|
NEW YORK (CNNfn) - In a rare display of corporate contrition Friday, Motorola Inc. publicly rued its failure to pump more money sooner into the burgeoning market for digital technology, and predicted it will incur a "significant" second-quarter loss in semiconductors, by far its largest business.
Motorola executives also said that analysts told them they expect the global semiconductor industry to shrink 2 percent in 1998 instead of growing 17 percent, as initially predicted.
The remarks came during a 90-minute teleconference at which Motorola's top executives elaborated on the company's previously announced plans to cut 15,000 jobs, or 10 percent of its workforce, and take a $1.95 billion charge to pay for the consolidation of its hard-hit semiconductor and paging businesses.
Motorola said the draconian restructuring, which also entails exiting underperforming businesses and writing down assets, will help ease profit erosion and bolster market share while saving the company $750 million annually.
Shares of Motorola Inc. (MOT) had been off 1/8 at 51-3/8 in pre-opening trade Friday. But the stock enjoyed a modest rebound at the Dow opening, gaining ½ a point to trade at 52, as investors reacted with cautious optimism to the restructuring plan.
Robert Growney, Motorola's president and chief operating officer, said weak unit demand for semiconductors in Asia and a general softening in prices had dealt a severe blow to the company's prospects in that area.
We remain "extraordinarily cautious about semiconductor [business] and its performance the rest of the year", Growney said.
He added that Motorola's messaging information and media segments also will post second-quarter losses similar to those in the first quarter, without specifying numbers.
Christopher Galvin, Motorola's chief executive officer, said that henceforth the company will try to reorient its focus more towards enhancing the usability of its wireless devices and better developing its embedded chip technology for use in a wide range of non-computer products.
We want to "solidify positions where the company has core competences," Galvin said.
Motorola said it has yet to finalize its semiconductor business model for 1999. But Growney said he expects capital expenses to remain unchanged as the company channels resources into other areas of business, including end-to-end networking.
Growney expressed hope that a new line of digital cellular products, due out in July, "will bode us well in the second half" of 1998.
Motorola, once a leading light in the wireless and communications equipment industry, has taken a pounding recently as consumers' preferences for new types of digital technology have outpaced the company's chip-heavy business model. 
|
|
|
|
|
|
Motorola
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
