Motorola sees loss, layoffs ahead

The wireless technology titan predicts a fourth-quarter loss of 4 cents a share and says it will eliminate 7,000 jobs.

Margaret Kane Former Staff writer, CNET News
Margaret is a former news editor for CNET News, based in the Boston bureau.
Margaret Kane
3 min read
Motorola didn't hold out much hope for a brighter end to the year Wednesday, predicting a loss in the fourth quarter and more layoffs.

Motorola expects to post a loss of 4 cents per share in the fourth quarter, with sales flat to 3 percent higher than they were in the third quarter. On Tuesday, the company reported a third-quarter operating loss of $153 million excluding charges and $1.4 billion with them.

Analysts had been looking for the company to post a profit of 1 cent per share and expect sales to rise as much as 9 percent, according to First Call. Motorola didn't give an outlook for 2002.

On a conference call with analysts, company executives also upped the number of job cuts expected this year by 7,000, with 4,000 cuts coming from the sale of various businesses, and the remainder coming from "smaller reduction actions" and attrition. With these cuts, Motorola will have eliminated 39,000 jobs by the end of the year.

The company said in July that it would eliminate another 4,000 jobs. It trimmed third-quarter estimates in September, saying third-quarter sales would likely be flat compared with the second quarter, instead of the 5 percent increase it had previously expected.

Shares of Motorola closed up 19 cents at $16.91.

One bright spot in Motorola's third-quarter report was its handset unit, which returned to profitability one quarter earlier than expected. An industrywide slowdown had hurt the personal communications segment earlier in the year, and operating earnings for the quarter were just $19 million, down from $189 million in the year-ago quarter.

Sales were also down 16 percent from the year-ago quarter to $2.7 billion, although they were up 8 percent from the second quarter. Orders increased 3 percent from the second quarter, and market share rose by about 2 percent from a year ago.

While Motorola expects higher sales and profitability in the handset unit going into the fourth quarter, the overall market will remain difficult. The company said it expects to see worldwide handset unit shipments of 380 million to 400 million, down from earlier predictions of 400 million to 425 million. In 2002, it sees worldwide shipments at 420 million to 460 million.

"While progress in the handset division certainly raises hopes that the company is on its way, we believe that weakness in the other businesses are a strong reason to remain cautious," Bernstein analyst Paul Sagawa wrote in a research note. "Motorola recent history is a record of broken promises and disappointments. We need more concrete evidence that the company is making progress in all of its businesses."

Things aren't looking better in other areas of the company. Executives said they don't see the worldwide semiconductor market recovering until the first half of 2002, prompted by economic uncertainty resulting from the Sept. 11 terrorist attacks. It now expects global industry chip sales to fall by 25 percent to 30 percent in 2001, off an earlier prediction of a 15 percent to 20 percent decline. Global chip sales are expected to pick up in 2002, rising 5 percent to 10 percent, but not as much as earlier predicted.

Companywide, Motorola posted an operating loss of $153 million, or 7 cents a share, in line with analyst estimates. That excludes restructuring and other charges, which, if added in, bring the company's total loss to $1.4 billion, or 64 cents per share.

Sales fell to $7.41 billion from $9.49 billion in the year-ago quarter.