NEW YORK (CNN/Money) -
Motorola Inc. warned Monday that its second-quarter sales and earnings will miss forecasts due to unexpectedly low Asian sales.
Motorola (MOT: Research, Estimates) stock fell about 3.5 percent on the news in active afternoon trading on the New York Stock Exchange.
The world's No. 2 maker of wireless phones blamed the flu-like Severe Acute Respiratory Syndrome (SARS), which has hit Asia particularly hard, for the sales weakness.
Motorola has the largest share of the cell phone market in China, where SARS has caused the most damage. China accounted for about 14 percent of Motorola's sales last year, and the company has large manufacturing operations there.
"The Chinese market would be weak even if SARS had never happened. It's just the icing on the cake,'' Sanford C. Bernstein analyst Paul Sagawa said of the company.
The company also said semiconductor product sales to the wireless market also were affected by SARS, as well as by damage to a facility in Sendai, Japan, from a recent earthquake there. Sales in Europe, North America and Latin America were on target for the period.
Motorola, based in Schaumburg, Illinois, said it now expects net income of about 2 cents per share for the second quarter. Excluding one-time items, it said it should about break even. The company had previously forecast EPS of between 3 and 5 cents in the period. Analysts surveyed by earnings tracker First Call had a consensus EPS forecast of 4 cents and a range of estimates from 3 cents to 6 cents.
It said its new sales guidance for the period is $6.0 billion to $6.2 billion. It had previously said it expected sales between $6.4 billion and $6.6 billion and research firm First Call's forecast called for revenue of $6.4 billion in the period.
The company did not give new full-year guidance, although it said that guidance will be lowered due to the weaker-than-expected second quarter and the continued impact of the problems into the third and fourth quarters. But it said it believes there will eventually be a rebound in demand from Asia.
"The company is confident that health authorities in Asia will bring SARS under control and that consumer behavior patterns in the region will return to normal," said the company's statement. "However, the timing of a return to normal conditions in Asia is uncertain."
Motorola President and Chief Operating Officer Mike Zafirovski said on a conference call with analysts that 17 new cell phone models in Asia in the second half of the year would help stanch the share losses. He also said Motorola is focusing on new retailers and sales in smaller Chinese cities.
Analysts also expect Motorola's larger rival, Finland's Nokia (NOK: up $0.14 to $17.96, Research, Estimates), to cut its financial outlook for the same reasons when it provides a quarterly update Tuesday.
--from staff and wire reports