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Motorola warns, cuts jobs
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October 10, 2001: 1:08 p.m. ET
The company sees a loss of 4-to-5 cents per share where analysts had expected a profit.
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NEW YORK (CNNmoney) - Motorola said Wednesday it expects to post a fourth-quarter loss due to a delayed recovery in the global semiconductor sector, but said it sees stability in its wireless handset business.
The company also announced further job cuts in an attempt to return to profitability.
On a conference call following its earnings release Tuesday, the company said it expects to report a fourth-quarter loss of 4 to 5 cents per share. Analysts had expected Motorola to earn 1 cent per share in the period, according to earnings tracker First Call. It also sees fourth-quarter sales flat to 3 percent higher than the third quarter.
A fourth-quarter loss would be the company's fourth consecutive losing quarter.
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 CNNfn's Joya Dass takes a closer look at Motorola's job cuts and wireless handset business. |
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Schaumburg, Ill.-based Motorola said it expects global semiconductor revenue to drop 25 percent to 30 percent for the sector this year and sees the industry recovering in the first half of 2002. The company anticipates chip sales growing 5 percent to 10 percent in 2002.
Motorola does see some recovery in its handset business this year. The company said it expects fourth-quarter sales and profits in the division to increase from the third quarter.
The company also said it will cut another 7,000 jobs in the fourth quarter, bringing the total number of cuts to 39,000 for the year.
Motorola reported a third-quarter loss Tuesday in line with lowered expectations on sales that fell 22 percent from a year ago.
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After the close of trading Tuesday, Motorola said it lost 7 cents per share in the third quarter. That excludes restructuring charges and other one-time items and contrasts with a profit of 26 cents per share during the same period last year.
Analysts generally had been expecting Motorola (MOT: up $0.08 to $16.80, Research, Estimates) to log a loss of 7 cents per share. Most lowered their estimates after Motorola warned of a shortfall in early September.
Including charges, Motorola's net loss for the quarter was $1.4 billion, or 64 cents per share, compared with a net profit of $531 million, or 23 cents per share, during the same quarter last year.
At $7.4 billion, Motorola's third-quarter sales fell 22 percent from $9.5 billion a year ago and were slightly below the $7.5 billion the sales it reported during the second quarter.
On Sept. 6, Motorola said it expected to post a third-quarter loss, excluding restructuring charges and other one-time items, ranging between 5 cents and 8 cents per share. It said that it expected sales to be about even with the $7.5 billion recorded during the second quarter. Prior to that warning, Motorola executives had been expecting a more modest loss and a sales increase of roughly 5 percent.
The company's latest results marked the third consecutive quarterly loss for Motorola, whose business has been hit hard by a global telecommunications slowdown.
While best known for mobile phones and pagers, which account for the bulk of sales, Motorola also is a leading supplier of semiconductors used to make wireless communications devices. About 25 percent of the company's sales are derived from its semiconductor unit.
Faced with a substantial slowdown in all its end markets, the company this year has implemented a broad restructuring program under which it has: laid off more than 32,000 employees; consolidated its 30 separate units that made communications products into one large division; enlisted new executives to head up its core operating units; and sharpened its focus on the market for wireline broadband communications equipment.
In its earnings release, the company said its wireless handset business had returned to profitability and had made progress toward reducing its operating loss.
The company also said it paid down $2.4 billion in debt during the quarter and generated positive cash flow of roughly $200 million in the third quarter.
At $2.7 billion, Motorola's personal communications segment, which includes mobile phones and pagers, logged a 16 percent decline in sales during the third quarter. Orders for that business segment were $3 billion, down 12 percent. The business segment recorded operating earnings of $19 million, a 90 percent decline from versus $189 million a year ago.
Third-quarter semiconductor sales fell 48 percent to $1.1 billion, while orders fell 49 percent to $1.1 billion, Motorola said. The company's semiconductor business logged an operating loss of $355 million, compared with operating earnings of $202 million a year ago. 
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