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Motorola cuts outlook, 4,000 jobs

The wireless handheld maker trims its outlook for the next two quarters and says it will also cut 4,000 jobs.

Motorola, which reported a second-quarter loss due to the gloomy telecommunications market, said Thursday that sales will pick up slightly through the rest of the year, but not as much as analysts had hoped. Its bottom line is also likely to miss expectations.

In a separate announcement Thursday, Motorola said it would cut another 4,000 jobs. The company is now expected to reduce its work force to 117,000 employees. Some of the job loss will be due to attrition, according to a Motorola statement.

On Wednesday, Motorola posted an operating loss of $232 million, or 11 cents a share, excluding special charges. Including the charges, the company recorded a net loss of $759 million, or 35 cents per share. Motorola had previously cautioned analysts that its second quarter would fall short of its first quarter, and Wall Street consensus was for a 12 cent per-share loss excluding charges.

Company officials said in a conference call Thursday that sales should rise 5 percent sequentially in both the third and fourth quarters. Motorola does expect to post a loss of "several cents per share" in the third quarter, but should be "slightly profitable" in the fourth quarter.

But that's still not up to Wall Street expectations. Analysts had been looking for a break-even third quarter and an 11 cent per-share profit in the fourth quarter, according to First Call.

CEO Chris Galvin tried to reassure analysts on a conference call that the company would be able to manage itself through the downturn, noting that "all of us know how to manage in a recession."

Handset makers and component suppliers have had rough sledding since an inventory glut in wireless handsets spread from Europe to Asia. Nokia, a major competitor, had warned it would miss estimates for the second quarter.

While Motorola's loss arrived in-line with expectations, sending its stock up in after-hours trading Wednesday night and up $2.48, or 15 percent, to $18.15 Thursday, there was some cause for caution.

Stock price from July 2000 to present.  
Source: Prophet Finance
Total sales slipped 19 percent from a year ago to $7.5 billion. Sales in its personal-communications segment fell 25 percent to $2.5 billion, due to lower worldwide demand for wireless telephones, and lower prices for the phones that did sell. Motorola said it expects overall industry handset shipments to be 400 million to 425 million in 2001, down from earlier predictions of 425 million to 475 million.

Its global telecommunications segment, which includes next-generation network technology, saw sales fall 14 percent to $1.7 billion. Sales in its semiconductor products segment plunged 38 percent to $1.3 billion, as part of a "very substantial downturn occurring across the worldwide semiconductor industry."

Motorola executives said Thursday that they see the worldwide semiconductor market sliding 15 percent to 20 percent in 2001, compared to 2000, but growing 15 percent to 20 percent in 2002. The company's own semiconductor business will see sales down "very significantly" in the third quarter compared to a year ago.

Looking to the third quarter, Motorola expects its personal-communications and global telecom businesses to continue to see sales slide versus a year ago, although they will be up from the second quarter.'s Ben Charny contributed to this report.