Motorola Posts Operating Loss
Motorola Inc., the bellwether of the technology sector, on Tuesday reported its first quarterly operating loss in 15 years, and provided the market with few clues about its prospects in a worsening U.S. economy.
The wireless communications and semiconductor giant had warned in February that it could report a first-quarter loss if an economic slowdown persisted. The results came in within the range of analyst estimates but missed the consensus forecast.
“We see a continuing downturn in the U.S. economy beginning to spill over to the rest of the world,” Christopher Galvin, chairman and chief executive, said in a news release. “The high-tech sector, which has been hard hit, is already in a recession. These issues, plus interest rate policy or energy prices, cannot be controlled by Motorola.”
Motorola is the first of the Big Three mobile phone makers and the first major technology company to report on the latest quarter, which is expected to be a rocky one for the industry.
Comments by Motorola executives on a conference call with Wall Street this morning are expected to provide guidance on the intensity and duration of the economic downturn, analysts and portfolio managers said.
“As goes those statements, so goes this stock and probably to a certain extent this little rally we’ve had,” Tim Ghriskey, senior portfolio manager with Dreyfus Fund, said.
Some analysts hope Motorola will shed light on which businesses it may sell to become more competitive and profitable.
The Chicago-based company reported an operating loss of $206 million, or 9 cents a share, compared with a profit of $481 million, or 21 cents, a year ago. Revenue for the period ending March 31 fell 11% to $7.8 billion.
Analysts were expecting a loss between a penny and 14 cents, with the average estimate at a 7-cent loss, according to market research firm First Call/Thomson Financial.
Justin McNicholas, portfolio manager with Osborne Partners Capital Management, a San Francisco-based asset management firm, called Motorola’s first-quarter results “abominable, as expected.”
Motorola said cash flow was positive in the first quarter and expects that to remain true for the full year.
Shares of Motorola slipped to $12.05 in extended-hours trading after closing up $1.50, or 13%, at $13 on the New York Stock Exchange before the results were released.
On Friday, shares of Motorola fell to their lowest level in eight years on debt fears, before rebounding Tuesday in the exchange’s heaviest trading. Stocks staged a blazing rally during the regular session Tuesday.
Motorola said its personal communications unit, which makes mobile phones, reported an operating loss of $402 million, contrasted with a profit of $53 million a year ago. Sales fell 29% to $2.3 billion.
The semiconductor unit also reported an operating loss of $131 million from $128 million a year ago. Sales fell 22% to $1.5 billion.
The broadband communications unit said operating profit rose 31% to $130 million on a 21% sales increase of $818 million.
Motorola has been taking aggressive cost-cutting measures, including the slashing of 22,000 or 15% of its jobs this year.
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Uphill Battle
Shares of technology bellwether Motorola surged $1.50, or 13%, in active Big Board trading to close at $13, ahead of the company’s release of first-quarter results.
Motorola, daily closes and latest on the New York Stock Exchange
Tuesday: $13.00, up $1.50
Source: Bloomberg News
