THE DAY AHEAD: Motorola has some explaining to do with 4Q

Maybe this is why Motorola Inc. (NYSE: MOT) chose to release results "after the bell" when the U.S. stock markets were closed for Dr. Martin Luther King Jr.'s birthday -- sales were light, component shortages hurt handset sales and the Iridium satellite venture remained a drag.

Motorola: Bright future ahead?

Overall, Motorola's fourth quarter was decent, but it isn't good enough for investors, which drove shares up 9 percent in anticipation of the earnings news (chart). The company failed to live up to Wall Street's inflated expectations.

First the good news: Motorola beat estimates with fourth quarter operating earnings of $514 million, or 82 cents a share, on sales of $8.5 billion. First Call consensus called for a profit of 81 cents a share.

Including a one-time charge, Motorola reported fourth quarter earnings of $349 million, or 56 cents a share.

Now the bad news. Motorola only beat estimates by a penny. So-called "whisper numbers" were a few pennies higher. Then there's the revenue figure. Sales of $8.5 billion were below projections. In the long run, Motorola may look fine, but its earnings report doesn't do much to justify the stock's run-up.

Eric Buck, an analyst with Donaldson, Lufkin & Jenrette, was expecting Motorola to report fourth quarter revenue of $8.6 billion. Revenue from continuing operations was up 7 percent compared to a year ago. Other analysts boosted price targets ahead of the earnings report and will be disappointed.

And then there's the handset business. Motorola's sales were affected by component shortages, but supply is improving.

"While component shortages are expected to continue in the first quarter of 2000 and to a lesser degree in the second quarter of 2000, the availability of components continues to improve sequentially," the company said. "This sequential improvement, coupled with a very significant backlog to start the first quarter, is expected to result in higher sales of wireless phones versus the fourth quarter of 1999."

In a booming market for wireless phones, Motorola's personal communications unit had sales of $3.5 billion, up 13 percent from a year ago. Orders were up 12 percent to $3.6 billion. Some analysts were expecting a much higher growth rate in the 30 percent range.

In its statement, Motorola declined to get specific about its market share vs. competitors such as Nokia (NYSE: NOK) and Ericsson (Nasdaq: ERICY). Motorola also didn't go into much detail about component shortages.

Motorola officials are likely to explain the component issues and market share on its conference call this morning at 8 a.m. EST.

Officials are also likely to address the Iridium (Nasdaq: IRID) issue. Iridium's satellite venture, which now operates under the regulations of Chapter 11 of the U.S. Bankruptcy Code, has given Motorola a black eye. Iridium, bankrolled by Motorola, never really caught on because its service was expensive.

Motorola recorded a special charge of $740 million to increase its reserve related to its financial exposure to the Iridium project. That should cover Motorola's exposure to the Iridium mess. In addition, Iridium hasn't paid Motorola for services since the second quarter of 1999. The Iridium problems could be resolved Feb. 15. After Feb. 15, Motorola won't be obligated to provide services to Iridium unless it gets paid.

Overall, Motorola's outlook is promising. The company is on the right track with its restructuring and is well positioned for the wireless boom. Its chip unit is also back in the black after losses a year ago. Motorola will also include results from the recently completed acquisition of General Instrument Corp., which is a well-run business.

Officials are likely to be optimistic on the future, but next time Motorola will have to deliver a little more upside to get traders excited.