Motorola's stock had soared in trading today in anticipation of the earnings announcement, reaching 82-1/2, up 2-1/8 from yesterday's close of 80-3/8. The stock peaked above its record high to 83 in intraday trading. The previous high of 82-1/2 was set in September 1995.
But the earnings news will likely disappoint bullish investors. For the quarter ending in June, the maker of mobile communication products reported a net income of $268 million, or 44 cents a share, down from $326 million, or 54 cents a share, for the same quarter a year earlier.
Motorola is stepping away from the dynamic random access memory (DRAM) market and took a one-time charge of $170 million, or 18 cents a share, against pre-tax earnings. Without the charge, the company would have reported profits of 62 cents a share--beating analysts' estimates of 56 a share.
In deciding to halt DRAM production, the company said it would reallocate resources to other technologies, including fast static random access memory (FSRAM) and integrated memory such as flash and electrically erasable programmable memory (EEPROM).
But charges might not end here.
Chief Executive Christopher Galvin said Motorola will continue to redirect resources toward core technologies and programs with the most potential, which "could result in additional charges against earnings in the second half of the year."
Sales grew to $7.5 billion, up from $6.8 billion reported in the same quarter a year ago.
During the quarter, the biggest sales drivers were cellular products, GSM digital products such as digital cellular phones, and semiconductor products, a spokesman said.
The computer group, for example, saw its sales grow 25 percent and orders were up over 50 percent. But the contribution to Motorola's total sales was very small, the spokesman said.