Motorola Heads South, Blames East
Motorola Inc. warned late Thursday that its first-quarter earnings will be hurt because of weak currencies and slower-than-expected sales of its semiconductors and pagers in Asia. The news sent Motorola’s shares down 8% in after-hours trading.
The company said it expects first-quarter revenue will be little changed from the $6.64 billion it had a year ago, causing earnings to be “well below” analysts forecasts. The world’s largest maker of cellular phones was expected to earn 49 cents, according to analysts polled by IBES International Inc.
The warning is Motorola’s second in six months, suggesting the company is still having trouble staying on track. Its troubles are compounded by being in markets where the products have become commodities, such as certain computer chips, cell phones and pagers. It also follows Intel Corp.’s surprise warning Wednesday that demand for chips is slowing.
“Motorola has stumbled on a couple fronts,” said Bruce Raabe, an analyst at Collins & Co., who rates the stock as a “hold.” “To hear they’re having trouble isn’t a huge surprise.”
The company’s shares hit a 52-week high of $89.94 last July 16 and have fallen steadily. The shares rose 25 cents to $55.88 in regular trading Thursday, then fell to $51.50 after the New York Stock Exchange closed, traders said. Motorola made its announcement after the close of U.S. trading.
The stock has fallen amid investor impatience with Motorola’s failure to predict downturns in its cellular and chip businesses. It has turned in lower earnings in four of the last five years.
“We’ve been out of Motorola for a long time,” said Ned Brines, senior research analyst at Roger Engemann & Associates, a Pasadena money manager with $6.5 billion of assets. “They’re losing share in the wireless market,” and mobile-phone prices are falling rapidly, he said.
Motorola earned $325 million, or 53 cents a share, in the year-ago period, on revenue of $6.64 billion.
The Schaumburg, Ill.-based company said most of the earnings shortfall is due to weak sales in its semiconductor business. Results there have been hurt by “significant softness” in demand in Asia and lower prices in other areas.
“Motorola is in some hotly competitive markets,” Raabe said.
Although Motorola told investors in late January that its sales of cell phones in China and Japan wouldn’t be harmed by Asia’s economic crisis, that’s now changing. And it is compounded by semiconductor demand that’s drying up, particularly in South Korea.
As Asian currencies have tumbled against the dollar, investor confidence has waned and investment has slowed, leaving companies strapped for cash and having a hard time getting financing.
The weaker currency has made Asian products cheaper relative to those sold by U.S. companies.
