Motorola Profit Beats Expectations

Motorola Inc., the world’s No. 3 maker of computer semiconductors, said Monday that third-quarter earnings fell a less-than-expected 87% as cost cuts began to offset plummeting sales of semiconductors.

The company earned $40 million, or 7 cents a diluted share, before a charge that resulted in a loss. That compares with $308 million, or 51 cents, before a charge a year earlier. Motorola was expected to earn 1 cent, according to First Call Corp. Sales fell 2.7%, to $7.15 billion from $7.35 billion.

Motorola is wrestling with a global slowdown in sales of chips, which account for about a quarter of its revenue. Earnings have fallen as customers, hurt by Asia’s economic troubles, bought fewer chips, prompting Motorola to halt construction on a Virginia plant and announce plans to cut 10% of its work force. Those moves resulted in about $140 million in savings for the quarter.

“The semiconductor business is under pressure from Asia and overcapacity,” said Mona Eraiba, a Gruntal & Co. analyst.

Motorola said the cost controls are on track to reach an annualized savings rate of at least $750 million by mid-1999.

Schaumburg, Ill.-based Motorola announced its earnings results after the close of U.S. trading. Shares fell $1.44 to close at $38.56 on the New York Stock Exchange. In after-hours trading, they rose as high as $40 after the earnings report was released.

While Motorola beat estimates, there was little promise of a recovery in its chip business. Sales in the semiconductor division fell 14% to $1.8 billion and orders fell 10%.

Sales in its cellular phone division rose 9% to $3 billion. A pretax charge of $117 million, or 14 cents a diluted share after taxes, for a write-off in connection with an acquisition resulted in a loss of $42 million, or 7 cents a share after taxes.