Motorola Profit Meets Estimates but Iridium-Related Losses Mount

Motorola Inc. said Tuesday that it took a $994-million third-quarter charge to cover its exposure to the cash-strapped Iridium satellite system--and it may have to set aside more money.

The world’s third-biggest semiconductor company and No. 2 cell phone maker disappointed Wall Street late Tuesday with the Iridium news and with third-quarter operating earnings that met but didn’t exceed expectations.

The company said operating earnings (before one-time items) were $332 million, or 53 cents a share, compared with $40 million, or 7 cents, a year ago. Analysts had expected 53 cents.

The results were reported after the market closed. In after-hours trading Motorola shares slid to $90.50 after falling $1.69 to $94.94 in regular New York Stock Exchange trading.

Third-quarter sales climbed 7.5% to $7.69 billion as demand for semiconductors and cellular phones rose strongly.

Sales in the personal communications unit, which includes cell phones, rose 37% to $3.1 billion.

“They have been shipping digital handsets like crazy,” said Mona Eraiba, a Gruntal & Co. analyst who rates Motorola “outperform.”

Semiconductor sales rose 11% to $1.6 billion.

Motorola is selling its less profitable chip businesses and cut $1 billion in costs in the unit last year, also helping earnings.

Still, Motorola’s investment in bankrupt Iridium, which is attempting to restructure, has been a drag on results. Motorola warned Tuesday that its involvement with Iridium may “necessitate an additional charge” in the fourth quarter. It didn’t elaborate.

“This could be a sign that the restructuring is not going that well,” said Armand Musey, a Banc of America Securities analyst.

Iridium filed for Chapter 11 bankruptcy protection in August after it failed to attract enough subscribers to pay its bills. Motorola, a founder of the company, holds an 18% stake.