Motorola reported a net income of $325 million, or 53 cents a share, down from $384 million or 63 cents for the same quarter a year earlier. Wall Street was expecting 45 cents a share, according to First Call.
Revenues fell five percent to $6.6 billion for the quarter ending March 29, down from $7 billion a year ago.
The company cautioned investors at the end of March that it expected a year-over-year decline in quarterly earnings until late this year, pointing to a drop in sales as it tried to emerge from last year's industry recession.
"The decline in sales was largely in [our] semiconductor business. While semiconductor sales and orders were lower than first-quarter 1996 levels, orders improved from the fourth quarter 1996 as the business emerged from last year's semiconductor industry recession," president and chief operating officer Robert Growney said in a statement.
Motorola's semiconductor sales fell 16 percent to $1.8 billion for the quarter compared with a year ago; orders declined five percent.
But the electronics giant saw its semiconductor segment return to an operating profit in the quarter compared with a loss in the previous quarter.
Sales in Asia-Pacific and Europe improved while sales in the Americas and Japan declined. Orders for chips in analog circuits, discrete and optoelectronic devices, and microcontrollers improved, but use in microprocessors and memory devices declined.
Meanwhile, analysts note that the industry is expected to perform better going forward. "The industry is going to have a reasonably good quarter [and] is growing again after collapsing in July of last year," said Montgomery Securities analyst Jonathan Joseph.
Other analysts agree this quarter marks another step in improvement since last year's fallout. "This will be just another step along that improvement as inventories, OEMs, and distribution channels start to rebuild up to normal levels after being deflated in 1996," UBS Securities analyst Charles Boucher said.
Market researcher Dataquest said that the semiconductor market would generate $19.6 billion in 1997, a 27 percent jump over 1996.
The growth is expected to continue through the remainder of this year and into 1998 as companies ramp up on upgrades and move toward more expensive machines.
"Networking is still growing with strong demand as companies expand telecommunications networks and upgrade equipment. After telecom deregulation last year, it is just starting to grow now [and there is a lot of room for continued growth]," Boucher added.
Analysts said there will also be a strong demand for electronic systems, telecommuting, and networking products.
Motorola marked the quarter with a series of products announcements that sought to broaden the company's product mix. The company announced plans to license and sell software from VocalTec that links corporate telephone systems to the Internet, providing a cheap alternative to long distance phone service.
The company also introduced TrueStream video and audio software that allows users to view and listen to clips as they are being downloaded. The software promises no significant loss in quality despite bandwidth or network restrictions, the company said.
It stocked shelves with its ModemSurfr and VoiceSurfr 56-kbps modems, which are based on technology from Rockwell, and revealed details about the first of its next-generation PowerPC processors called G3 at a conference in San Francisco. In addition, Motorola cut a deal with Be to bundle the BeOS with the Motorola Mac clones.