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Motorola beats forecasts
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January 17, 2000: 7:52 p.m. ET
Execs credit strong sales of wireless phones, semiconductors in fourth quarter
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NEW YORK (CNNfn) - Motorola Inc. posted a fourth-quarter profit that was just slightly ahead of Wall Street's estimates Monday, as stronger sales of wireless handsets and semiconductors offset declines in some of the company's other business segments.
The company's bottom line, however, was weighed down by its exposure to financially troubled Iridium LLC, a global satellite telephone company that Motorola helped finance.
Even so, executives at the Schaumburg, Ill.-based maker of computer chips and telecommunications equipment said they are on track for continued strong revenue growth in 2000.
Excluding special charges, Motorola (MOT) logged earnings of $514 million, or 82 cents per share, up from $159 million, or 26 cents per diluted share during the fourth quarter of 1998. Analysts polled by earnings tracker First Call had expected Motorola to post a profit of 81 cents per share.
Including the charges, Motorola's earnings for the quarter came in at $349 million, or 56 cents per diluted share. Motorola did not take any charges against earnings during the fourth quarter of 1998.
Sales were $8.5 billion, up 2 percent from the $8.3 billion in fourth-quarter sales one year ago, Motorola said.
For all of 1999, Motorola said its net income was $1.3 billion, or $2.08 per share, excluding special charges. Including the charges, Motorola posted a 1999 profit of $817 million, or $1.31 per share, on sales that rose 5 percent to $30.9 billion.
Motorola executives attributed the most recent quarter's strong showing largely to increased sales of wireless handsets and semiconductors.
"This quarter culminates a year in which we achieved significant improvement in financial performance from our digital wireless phone and semiconductor businesses and benefited from our corporate-wide restructuring actions," Robert L. Growney, Motorola's president and chief operating officer, said in a release on Monday.
"We have also made investments and formed promising alliances in third-generation wireless, Internet, broadband and semiconductor technologies," Growney added.
Iridium woes continued in quarter
Executives said that sales in Motorola's personal communications and semiconductor business segments increased substantially, while sales in its network systems and satellite communications groups slid.
The company blamed its association with financially troubled Iridium LLC for a sharp decline in sales of satellite communications equipment. Motorola did not specify how much lower the sales of such equipment were during the quarter.
The company also recorded a fourth-quarter charge of $740 million to increase reserves related to its financial exposure to Iridium, which filed for Chapter 11 bankruptcy protection last summer. Motorola, Iridium's largest investor, said the charge would fully cover its financial exposure to the company.
Meanwhile, sales in Motorola's personal communications segment, which includes wireless phones, rose 13 percent to $3.5 billion, executives said. Sales of semiconductor products increased 15 percent to $1.8 billion, Motorola said.
And Christopher B. Galvin, Motorola's chairman and chief executive, said the company is in a strong position to continue to accelerate sales throughout the remainder of this year.
"As economic conditions continue to improve in much of the world, we are in a position to achieve results in 2000 that are in line with our long-term financial objectives of self-funding revenue growth of 15 percent or more annually," Galvin said in a statement. "We will continue to change, sharpen our focus and strengthen our portfolio as we strive to achieve these results."
The company also said that shortages of some wireless-phone components may have had an impact on customer ordering patterns, as some customers appear to have ordered some of their fourth-quarter needs during the third quarter, when the company saw a 37 percent rise in revenue in its personal communications segment.
While it expects the component shortages to continue during the first quarter of 2000, and to a lesser degree in the second quarter, the company said availability of components is improving sequentially. That improvement, combined with a significant backlog moving into the first quarter, is expected to result in higher sales of wireless phones in the first quarter of 2000 over the fourth quarter of 1999, the company said.
Market watchers expected solid results
Market observers had been anticipating a strong showing from Motorola during the most recent quarter.
On Friday, Lehman Brothers analyst Tim Luke raised his price target on the company to 200 from 160, citing its recent moves into the market for broadband Internet access and its position in the blossoming market for wireless handsets.
In September, Motorola struck a deal to buy General Instrument Corp., a maker of cable television equipment, giving the company a leg up in the market for broadband Internet services, which use cable technology to deliver high-speed Web content. The company closed that deal on Jan. 5.
Luke also said that he expected Motorola's broad-restructuring - which began in 1998 and involved massive job cuts in an effort to cut costs and beef up the company's bottom line - to pick up steam in 2000.
And Luke wasn't the only analyst expecting strong results. By late Monday afternoon, Motorola's so-called "whisper numbers" -- estimates provided by some analysts to major clients and posted on investor Web sites -- had reached as high as 86 cents per share.
In New York Stock Exchange trade on Friday, Motorola shares ticked up nearly 9 percent, ending the session 12-7/16 higher at 151.
The financial markets were closed on Monday in observance of the Martin Luther King Jr. holiday.
The company has scheduled its fourth-quarter earnings conference call, which will be broadcast live over the Internet, for 8:00 a.m. EST Tuesday. 
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