Poor Planning Hurt Motorola, Analysts Say

Motorola Inc. made too many cellular phones, not enough pagers and too few semiconductors in the fourth quarter, causing its first profit decline in four years.

Motorola said Wednesday that it may be several quarters before the company bounces back from a slump in cellular phone sales and semiconductor capacity constraints.

“It’s a case where you had too much competition coming too quickly and the company didn’t prepare for it fast enough,” said Albert Lin, an analyst at Cowen & Co.

Motorola was hit broadside in the cell phone market by Nokia and Ericsson, which took about 5% of Motorola’s cellular phone market share in 1995, Lin said. Motorola’s fourth-quarter earnings fell 16%.

At the same time, the company failed to get up to speed in making semiconductors, which are an integral part of its products. Motorola’s paging business in particular suffered from a lack of chips. Pressure to lower its cellular phone prices hurt profit margins.

The company said it plans to spend $4.4 billion in 1996 for new plants and equipment to boost its supply of semiconductors. It already plans to build a $3-billion chip plant near Richmond, Va., to make PowerPC microprocessors.

“It’s going to take a couple of quarters before investors see hard evidence that Motorola is a great company that they need to own,” Lin said.

Analysts said the Schaumburg-based company will have to concentrate on replacing low-profit, aging cellular phones with ones consumers want to buy.

One in 10 people in the United States has a cellular phone and demand is slowing.