Motorola hits 3Q targets, unloads cellular units

3 min read

Motorola met analysts' estimates in its third quarter Tuesday, earning $598 million, or 26 cents a share, on sales of $9.5 billion.

First Call Corp. consensus pegged it for a profit of 26 cents a share in the quarter.

Motorola (NYSE: MOT) shares closed off 38 cents to $26.63 ahead of the earnings report.

The $9.5 billion in sales marks an 18 percent improvement from the year-ago quarter when it earned $361 million, or 16 cents a share, on sales of $8.1 billion.

"We are pleased that the performance of many of our businesses has helped us to achieve improved financial performance over the last nine quarters," said CEO Christopher Galvin in a prepared release. "Cost reductions and business portfolio changes will continue to help us fulfill our commitment to achieve ongoing earnings improvement."

In the quarter, Motorola reported special items resulting in a net charge of $95 million pre-tax, or 3 cents a share after tax. Charges were incurred primarily relating to the discontinuation of older wireless telephone products as part of an ongoing product portfolio simplification strategy, the closing of two older semiconductor wafer fabrication facilities, the settlement of a lawsuit, and the decision to exit certain unprofitable businesses.

In the quarter, its personal communications unit posted sales of $3.2 billion, up 4 percent from the year-ago quarter. Orders fell to $3.3 billion, down 23 percent from the year-ago quarter when orders were exceptionally high due to supply issues.

Global telecom solutions sales improved 23 percent to $2 billion while order increased 21 percent to $1.8 billion. Operating profits increased to $247 million from $186 million in the year-ago period.

ZDNet News Special Report: 2000 Q3 Earnings

Sales from its commercial, government and industrial systems units jumped 14 percent to $1.1 billion while orders improved 13 percent to $1.2 billion.

Company officials said sales of two-way radio equipment were higher in the Americas and Europe but declined in Asia.

Broadband communications sales surged up 47 percent to $917 million and orders increased 41 percent to $941 million from the year-ago quarter. Operating profits improved to $154 million from $77 million.

Semiconductor sales, perhaps the most closely watched segment, shot up 30 percent from the year-ago quarter to $2.1 billion while orders jumped 19 percent to $2.2 billion.

Company officials said strong demand for networking and wireless chips resulted in strong demand throughout Asia, the Americas and Europe.

Last quarter, Motorola met analysts' reduced estimates when it posted a profit of $515 million, or 23 cents a share, on sales of $9.3 billion.

Separately, Motorola announced that it would sell four cellular telephone operating companies in Mexico to Telefonica Moviles for $1.79 billion.

As part of the agreement, Telefonica would have the option of paying this amount in cash, using the proceeds from the IPO of Telefonica Moviles, or a slightly higher amount in shares of Telefonica, S.A.

Motorola shares moved up to a 52-week high of $61.50 in March after before slumping to a low of $26.50 earlier this month.

Twenty-four of the 27 analysts following the stock rate it either a "buy" or "strong buy."

First Call Corp. consensus expects Motorola to return a profit of $1.06 a share in the fiscal year.