Motorola Q1 Sales, Profit Off As Phone Sales Drop 29%

By Jeff Malester On Apr 16 2001 - 6:00am

SCHAUMBURG, ILL. — Despite a surge in its stock price a day prior to the release of its quarterly financial report — perhaps a long-shot wish for better-than-anticipated results — Motorola did not live up to what might have been.

Reporting that order growth had weakened across all sectors of the company, Motorola said it lost $206 million, excluding special charges, in the first quarter ending March 31, coming in at less than Wall Street expectations. This compares with a profit of $482 million in the year-ago first quarter.

Sales in the first quarter also were reported at a lower figure than Wall Street had expected, hitting $7.8 billion, or 11 percent below the $8.8 billion recorded in the same three months in 2000.

Motorola said in a conference call that its cell phone and semiconductor segments will report operating losses and lower sales in the second quarter, with the cell phone unit expected to return to profitability in the third quarter. Overall, the company said it expects a loss a bit wider in the second quarter, compared with the first.

Motorola's cell phone business unit, Personal Communications, the company's largest, reported sales for the first three months of $2.3 billion, down 29 percent from the $3.2 billion registered in the year-ago quarter, and the largest sales percentage drop for the three months of any company segment.

New phone orders dropped to $2.8 billion, albeit at the lower rate of 10 percent, compared with the year-ago figure. The segment reported a $402 million operating loss for the first quarter, compared with a $53 million operating profit in the same three months last year.

Motorola's quarterly results — the first three-month period since 1985 that the company reported it lost money on operations — were hardly a surprise. As recently as February, the company warned about its cellular phone and semiconductor segments showing poorer-than-expected results.

This quarter, the semiconductor segment, Semiconductor Products, took the second-largest hit, with sales of $1.5 billion, down 22 percent from the $1.9 billion reported in the year-ago first quarter. New orders were down 47 percent to $1.1 billion, while the company took a $131 million operating loss, compared with a $128 million operating profit in the same three months last year.

Broadband Communications was Motorola's only business segment to report an increase in sales, orders and profit. Sales increased 21 percent to $818 million, compared with $678 million in the year-ago three months, while operating profit climbed about 30 percent to $130 million, up from $99 million, the previous year. Orders rose 3 percent to $905 million.

Motorola said sales and orders for wireless phones were both down in the Americas. The second-largest phone producer, behind Nokia, pinned the decline in financial performance for its Personal Communications segment on lower worldwide demand for wireless phones by service providers and an increase in manufacturing costs as a percent of sales.