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Motorola warns of a first-quarter shortfall

The company says first-quarter earnings and sales will fall short of estimates--and an operating loss could occur--because of significant weakness in orders across its business segments.

    Motorola on Friday warned that first-quarter earnings and sales will fall short of estimates--and an operating loss could occur--because of significant weakness in orders across all of its business segments.

    Analysts polled by First Call have been expecting the company, based in Schaumburg, Ill., to earn 12 cents a share on revenue of $8.8 billion.

    Motorola, which manufactures wireless handsets and semiconductors, said the "sharp" economic slowdown caused changes in its overall inventory and order patterns. The company said it could see an operating loss in the quarter if the order patterns persist.

    This is yet another profit warning for the stumbling company. Last December, Motorola cut fourth-quarter expectations, citing sluggish chips and cell phone sales. The company last month met analysts? reduced estimates and at the time said more restructuring moves are expected in the first quarter to help it get back on the earnings growth track.

    A recent downturn in the wireless handset market has prompted many heavyweights to stumble, including Motorola competitors Nokia and Ericsson. Nokia's fourth-quarter financial results beat Wall Street estimates by 2 cents, but the Finland-based cell phone giant also said its sales growth will be slower than expected in the first quarter of this year.

    "Our story today is, 'We need orders,'" Motorola Chief Operating Officer Bob Growney said during a conference call Friday morning. "We believe we've got a U.S. economy that is uncertain. As far as we are concerned, we are in a recession at this point."

    The company expects global handset sales for 2001 to be below 500 million instead of the recently indicated target of approximately 525 million. The sales malaise has also struck Nokia, which projects that 550 million units will be sold in 2001, also below earlier company expectations.

    Motorola executives said orders have weakened across several of its business units, primarily affecting growth in semiconductors, broadband communications and personal communications. The personal communications area includes products such as phones, pagers, radios, and cellular and satellite infrastructure equipment, and it accounts for 55 percent of the company's sales.

    Under its current order pattern, Motorola's semiconductor division in the first quarter will be one of the businesses that will show a loss.

    Growney said additional guidance and visibility will be offered following the release of the company's first-quarter earnings. He added that the company, as planned, has been busy trying to reduce capital expenditures during the quarter by setting certain cost-cutting initiatives. Motorola recently shut down six manufacturing plants and intends to announce four additional closures soon. The company said it is considering changes that could affect three additional plants as well in the near term.

    "We're working very diligently on our balance sheet at this point," added Growney.

    Although the call was not altogether upbeat, Growney took time to defend the company's position in the market, referring to a recent report that said Motorola has lost market share.

    "We're not losing market share," he said. "We believe, and still believe from the information we have and the data we collect, that we picked up a modest amount of market share in the fourth quarter...I have no sense that we're giving up market share in the current, first quarter."

    For 2001, analysts predict Motorola to post a profit of 76 cents a share on revenue of $41 billion.