SEC looking into Motorola disclosures
The government is investigating whether the company violated a rule prohibiting companies from tipping off Wall Street without making the information public.
A company spokesman said today that the SEC was making an "informal inquiry" about the company's discussions with analysts and that Motorola was cooperating with the inquiry. He would not discuss specifics.
The SEC rule in question is Regulation Fair Disclosure, which was passed last October. It requires that companies tell the public whenever they disclose sensitive data to Wall Street analysts. It was designed to ensure that individual investors get an equal shot at predicting the market as analysts do.
Motorola spokesman Scott Wyman said the company did not believe it had violated the rule, noting that the last public information it released was a Feb. 23 warning that Motorola would miss first-quarter estimates and could report a loss.
"Since that time we have not issued nor discussed any new information," he said.
While analysts by and large reduced their estimates at that time, several have dropped them even further since then. According to First Call data, between March 7 and 9, 10 of the 24 analysts who cover the company revised estimates for the quarter, citing a variety of factors, including general slowdowns in the telecommunications sector and excess mobile phone inventories.
The cuts were hardly surprising; Motorola's two major competitors Ericsson and Nokia have also warned of slowdowns. And companies that supply parts to Motorola have also issued warnings, as have a slew of other companies that sell products in the telecommunications market.
In addition, Motorola has laid off 12,000 employees since December. On March 13, the company said it would let go 7,000 workers in a bid to trim costs at the company's wireless handset business. The analysts did not return calls requesting comment.
Motorola executives have spoken to analysts since the February announcement, including giving presentations at conferences held by analyst firms, but Wyman said they did not disclose any new information.
"In the normal course of conducting business we speak with analysts on a daily basis. We call them, they call us," he said. "We have not had any conference calls with analysts since February 23. Some of our executives have been at analyst conferences, but again, no new information was released."
A representative for the SEC did not immediately return calls requesting comment.