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Motorola sees 3Q replay
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July 8, 1998: 10:39 a.m. ET
Executives expect break-even quarter, are gloomy about semiconductors
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NEW YORK (CNNfn) - Motorola Inc. executives issued a gloomy financial outlook Wednesday, saying the company's third-quarter earnings likely will mirror its second-quarter results as it remains concerned about growth in the worldwide semiconductor industry.
Company executives also said Motorola expects to report $100 million in savings in the third quarter related to job cuts it announced last month.
On Tuesday, Motorola reported a sharp decline in its second-quarter operating profit.
Robert Growney, Motorola president and chief executive officer, said the company expects to break even in the third quarter, with no significant change in sales from the second quarter.
Growney also said the company has lowered its forecast for growth in its semiconductor business to between -8 percent and -12 percent.
"We remain concerned about recovery in the semiconductor industry given the problems with capacity," Growney said. "This will be three soft years in a row for that industry as a whole. We're approaching it without much optimism."
Wall Street reacted negatively to the news as Motorola (MOT) shares slipped 1-1/16 to 53-15/16 in early trading.
More restructuring ahead
In June, Motorola announced a plan to cut 15,000 jobs, or 10 percent of its workforce, over the next 12 months. The company took a $1.98 billion charge in the second quarter for the restructuring.
Ed Gams, Motorola vice president and director of investor relations, said the company expects to report a $100 million saving in operating expenses in the third quarter.
"There was some saving in the second quarter, but it was minimal," Gams said.
A Motorola spokesman said the company will announce additional restructuring initiatives by the end of the week.
Analysts expect consolidation of its communications products group.
"I think you'll see an announcement of the communications group restructuring," said Jeffrey Schlesinger, technology analyst at Warburg Dillon Read. "That should come out in the next couple of days as they look at how to consolidate the paging, cellular and LAN [local area network] mobile businesses."
Motorola has been selling many of its less-profitable businesses over the last few months, including its consumer modem unit.
Gams declined to comment on what additional business units Motorola is looking to sell in the near future, though he said the company has lost $300 million in sales in 1998 from units sold since mid-1997.
"We recently announced the sale of our cellular reseller business in Europe," Gams said. "The gain from that transaction will be recorded in the third quarter."
Looking forward to fiscal 1999, Gams said any improvement in Motorola's earnings will depend on a better environment in the worldwide semiconductor industry, better profits from its cellular product division and new products related to its $5 billion Iridium satellite program.
"We're going to sell a far greater number of phones and pagers for Iridium in 1999," Gams said. 
-- by staff writer John Frederick Moore
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Motorola
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