Motorola earnings meet expectations
The company reports earnings that match Wall Street expectations, although sales are somewhat less than some analysts had predicted.
Excluding special charges, Motorola's ongoing operations produced earnings of $598 million, or 26 cents per share, on third-quarter sales that totaled $9.5 billion. On a similar basis, the company earned 16 cents per share in the third quarter of last year.
Analysts had been looking for Motorola to report earnings of 26 cents per share, according to the consensus estimate from First Call/Thomson Financial. Sales were expected to be in the range of $9.7 billion to $10 billion, according to several brokerage reports released this week.
The company's shares headed down in after-hours market activity, trading recently at $25.75 on Island ECN. Ahead of the earnings announcement, Motorola shares closed up 75 cents to $27.75 on a volume of 18.3 million shares, making it one of the most actively traded companies Tuesday on the New York Stock Exchange.
Motorola took a $95 million pretax charge to cover the discontinuation of older wireless telephone products, the closing of two chip plants, settlement of a lawsuit, and the decision to exit certain unprofitable businesses, according to a statement. However, that pretax charge, which amounted to 3 cents per share after taxes, was largely offset by gains from stock sales during the quarter.
Paul Sagawa, an analyst at Sanford C. Bernstein, said that sales were a bit shy of the $10 billion he projected but that he was generally pleased with where Motorola was headed.
"Motorola is trading market share for margins," Sagawa said shortly after the earnings release. "I think that is the right business decision."
Sagawa added that the earnings should help reverse recent declines in Motorola's stock price.
"I think the reality of their earnings should be sufficient."
CIBC World Markets analyst Dale Pfau said Motorola's report was "kind of a mixed bag."
"Versus my estimate, the revenues were light," Pfau said. "But the operating margins were better than I expected."
In a statement, Motorola chief executive Christopher Galvin said he was pleased that a number of the company's units "helped us to achieve improved financial performance over the last nine quarters."
Motorola's wireless business, what it calls the personal communications segment and includes its cell phone handsets, produced third-quarter sales of $3.2 billion, up 4 percent from last year's third quarter. However, new orders were $3.3 billion, down 23 percent from the third quarter of 1999.
The unit's operating profits were $185 million, or 5.7 percent of sales. That was up from 4 percent in the prior quarter but below what some analysts had projected.
Motorola's chip business saw sales rise 30 percent to $2.1 billion, while orders increased 19 percent to $2.2 billion. Operating profits in the semiconductor business were $190 million, or 9.1 percent of sales. That was in the range of what analysts had expected.
Sales in Motorola's broadband unit, which includes Motorola's set-top box and cable system products, improved 47 percent from year-ago levels, to $917 million. Orders were up 41 percent, to $941 million.
Sales in Motorola's integrated electronic systems segment were up 17 percent, to $737 million, while sales for commercial, government and industrial systems rose 14 percent, to $1.1 billion.
Galvin said the company plans to respond to concerns about the health of the global technology market.
"We have begun to take additional actions to streamline our portfolio and reduce the cost of our operations," Galvin said. "Cost reductions and business portfolio changes will continue to help us fulfill our commitment to achieve ongoing earnings improvement."
Motorola's earnings came the same day that Lucent Technologies announced it would post lower-than-expected fourth-quarter sales, in the range of 17 cents to 18 cents per share.
Motorola will hold a conference call Wednesday morning to discuss the results.