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Motorola hammered on mixed outlook

Motorola Inc. (NYSE: MOT) shares fell 17 percent in early trading Tuesday after the company said its second quarter and fiscal 2000 earnings will be slightly below estimates. The company cited lower profit margins on wireless phones.

At 9:53 a.m. EDT, Motorola shares were off 25 3/8 to 125 5/8, or 17 percent.

On a conference call with analysts, Motorola, which makes wireless phones, set-top boxes and semiconductors, said it expected to report second quarter earnings of 67 cents a share. First Call consensus was 70 cents a share. Sales for the second quarter should hit $9.5 billion, the company said.

For 2000, Motorola said it expected earnings of $3.14 a share on sales of $39.8 billion. The full-year earnings forecast was two pennies above Motorola's earlier estimate given on the fourth quarter earnings conference call. However, First Call pegged 2000 earnings of $3.18 a share.

Consensus estimates are going to come down. Lehman Brothers cut its 2000 estimate to $3.24 a share from $3.30 a share. Lehman Brothers maintained its "buy" rating and $200 price target.

After the bell on Monday, Motorola, based in Schaumburg, Ill, topped estimates by a penny with first quarter earnings of 59 cents a share.

Although Motorola's results were strong, wireless phone profit margins may concern investors. Ed Gams, investor relations director, said component shortages and falling average selling prices hurt wireless profit margins. Parts shortages should ease in the second quarter.

Motorola's outlook was positive for many of its other businesses. The company said that worldwide semiconductor sales would be in the high end of the 20 percent to 25 percent range.

The company's broadband business -- which includes cable modems and General Instrument's set-top boxes -- saw strong growth in the first quarter. Motorola said it would move 5 million set-top boxes in 2000, up from the company's forecast of 4 million to 4.5 million.

Motorola competes with Nokia (NYSE: NOK) and Ericsson (Nasdaq: ERICY) in wireless phones; AMD (NYSE: AMD) and Intel (Nasdaq: INTC) in semiconductors; Scientific-Atlanta (NYSE: SFA) in set-top boxes; and 3Com (Nasdaq: COMS) for cable modems.

• Nokia, Motorola, Ericsson set conference call
• Motorola beats estimates
• Motorola's earnings release>