Motorola Profit Plunges but Tops Forecasts

Motorola Inc., the world’s top maker of cellular phones, said Tuesday that its second-quarter earnings plunged, hurt by slumping sales of semiconductors and mobile phones in Asia, but overall the report beat Wall Street’s expectations.

The company earned $6 million, or 1 cent per diluted share, before a $1.91-billion charge left Motorola with its first loss in 13 years. A year ago, the company had a profit of $392 million, or 64 cents, before a charge. Motorola was expected to lose 4 cents a share in the quarter, according to First Call Corp.

The profit decline confirms Motorola’s warning last month that its business is reeling from weak sales of semiconductors. That segment’s revenue fell 11% and orders tumbled 25%, mostly due to the slowdown in Asia. Motorola’s mobile phone sales fell 1% in a fast-growing market in which such rivals as Nokia and Ericsson are thriving.

“They were hit with a double whammy--a slowdown both in chips and the cell-phone business,” Rick Berry, an analyst with J.P. Turner & Co. in Atlanta, said before the earnings were released after the U.S. stock market closed. Second-quarter revenue fell 6.6% to $7.02 billion from $7.52 billion.

Investors were expecting bad news because Motorola warned June 4 that it might report a loss from operations. Its stock rose $1.44 to close at $55 on the New York Stock Exchange.

Motorola had a final loss of $1.3 billion, or $2.22 a share, including a charge of $1.91 billion, or $2.23 a diluted share after taxes, for a previously disclosed restructuring that includes cutting 15,000 jobs, or 10% of its work force.

A charge of $190 million, or 20 cents a share after taxes, to get out of the dynamic random-access memory business, resulted in net income of $268 million, or 44 cents, in the year-ago quarter.

All but one of Motorola’s business segments reported lower sales in the second quarter. The only one whose sales rose was land mobile products, which makes phones with walkie-talkie features. Sales in that unit rose 18% to $1.37 billion from $1.16 billion, Motorola said.

The weak market for semiconductors, which account for about 27% of Motorola’s sales, hurt the company the most. Chip sales fell 11% to $1.81 billion from $2.03 billion. Orders dropped 25%.