Motorola regains some ground

Motorola stock regains some ground after its announcement that its earnings had fallen 45 percent.

2 min read
Motorola (MOT) shares rose slightly more than two percent today after the company announced that its profits had fallen 45 percent.

Analyst John Lazlo with PaineWebber increased his recommendation today to "buy" from "outperform," while Alex Cena of Bear Stearns in New York raised his rating to "attractive" from "neutral."

Lazlo said he increased his recommendation because the company, when factoring out one-time charges, actually exceeded Wall Street's expectations. He added, however, that he has not changed his earnings estimates for next year.

Motorola shares closed at 66-3/8 a share, up 1-3/8 from the previous day.

Motorola, which makes semiconductor chips, cellular equipment, and space-related systems, reported net earnings of $238 million, or 39 cents a share, for the quarter ending December 31, down from $432 million or 72 cents a share a year ago. The company announced its results after the market's close.

The company reported a 35 percent drop in year-end profits to $1.15 billion for the year compared with $1.78 billion a year ago. Year-end revenues, meanwhile, rose 3 percent to $28 billion, up from $27 billion in the previous year.

The company's performance was less than analysts' estimates of 41 cents a share, according to First Call.

Motorola attributed its earnings drop to millions of dollars spent on restructuring, unusual charges for discontinuing some technology development and squeezed profit margins. But one analyst notes that it's initially hard to determine whether the company's bottom line is actually better than it appears.

"If some of these charges were one-time, and since their sales are higher than what we expected, their bottom line may have a better number," said Rakesh Sood, an analyst with Hambrecht & Quist.

Motorola reported a five percent rise in revenues to $7.7 billion for the quarter, compared with year-ago figures.

Semiconductor sales for the quarter were down 18 percent to $1.9 billion from a year ago. Orders dropped 11 percent during the period compared with the same period last year. The semiconductor group had an operating loss for the quarter compared with a profit a year ago.

But the company notes that excluding the unusual charges, the semiconductor group would have posted a profit for the quarter. Among its various market groups--personal computers, workstations and communications equipment--the company improved its volume of Motorola chip orders.

Motorola's fourth-quarter decline in semiconductor sales and orders contributed to the drop the industry saw in the Semiconductor Industry Association's December book-to-bill ratio, which serves as an industry benchmark and measures the number of new orders against what the chip vendors are actually billing for. The ratio dropped to 1.10 from 1.16 in the previous month.