Motorola Earnings Drop 41% In 4th Qtr.

By Jeff Malester On Jan 22 2001 - 8:00am

SCHAUMBURG, ILL . -Dogged by an increase in manufacturing costs and operating expenses that could not be offset by higher sales, Motorola reported a 41 percent drop in fourth-quarter profit, excluding one-time items, to $335 million, compared with $564 million in the same three months last year.

Sales for the second largest manufacturer of mobile phones hit $10.1 billion in the fourth quarter ended Dec. 31, up 11 percent from the $9.1 billion recorded in the year-earlier three months.

Including special items, earnings were $135 million, compared with $323 million in the same quarter last year. The 1999 figures are restated to reflect the merger with General Instrument Corp.

Looking at the steep earnings decline, president/chief operating officer Robert L. Growney said, "We have taken steps to reduce the cost structure in our manufacturing activities and to tightly control operating expenses. Further steps will be taken in 2001 to return the corporation to generating growth in its earnings."

Fourth-quarter sales in personal communications rose 1 percent to $3.5 billion, while orders dropped to $2.9 billion, off 20 percent. Due to increased manufacturing costs, operating profits in personal communications declined to $76 million, compared with $242 million in the year-ago period.

In the past two quarters, the company has stepped up actions to improve financial results in its personal communications business by realigning the segment to respond to changes in the market and to improve the existing cost structure. Focus has been on product simplification and restructuring of the supply chain.

Motorola said orders for wireless phones in the Americas increased, while sales were significantly higher.

"Despite a slowdown in the growth of overall consumer spending, we expect demand for wireless, broadband and work-group equipment and service to grow as individuals continue to be attracted to broadband's triple play of voice, data and multimedia, as well as the convenience of portable communications products," said chairman/CEO Christopher B. Galvin.

"The robustness of business activity in this economic cycle for companies like Motorola over the next few quarters will be largely determined by the level of success of further change in fiscal, tax and regulatory policy worldwide," said Galvin. "We are still in the early phase of this change in economic cycle. Therefore, its pace and direction are not firmly predictable."

For the full year, Motorola's sales from ongoing operations climbed 17 percent to $37.6 billion, compared with $32 billion a year ago. Including sales from businesses sold in 1999, sales increased 14 percent from $33.1 billion a year ago.

Full-year earnings from ongoing operations, excluding special items, were $1.9 billion, compared with $1.4 billion a year earlier. Including earnings from businesses sold in 1999, full-year earnings climbed 29 percent, compared with $1.5 billion in the previous 12 months.