Motorola Expects Bigger Loss in Second Quarter

Motorola Inc. said Wednesday it expects a loss in the second quarter that is a few cents wider than the loss it reported for the first quarter, signaling that the slowdown in the technology sector may not have ended.

“We are in a situation today which reflects, in our opinion, the boom-and-bust high-tech cycles of the ‘84-’85 time frame and/or perhaps the ‘74-’75 time frame,” Chairman and Chief Executive Christopher Galvin said in a conference call with analysts.

Amid slowing industry sales, Motorola said Wednesday its cell phone and semiconductor units will report operating losses and lower sales in the second quarter. The cell phone unit is expected to return to profitability in the third quarter.

Executives remain confident that the wireless communications and chip giant can survive the slowdown. “Motorola is fairly skilled at getting through difficult economic times,” President Robert Growney said.

The company late Tuesday reported its first quarterly operating loss in 15 years, driven by losses in its cell phone and semiconductor units.

Growney said Wednesday that Motorola plans to cut 4,000 jobs, bringing the number of layoffs announced since December to 26,000. The company had 147,000 employees at the end of 2000.

The Schaumburg, Ill.-based company expects a larger loss in the second quarter, in part because of lower manufacturing margins largely due to an unfavorable shift in sales, including a decline in semiconductor sales from the first quarter, Growney said.

Sales in the second quarter are expected to “increase somewhat” from the $7.8 billion reported for the first quarter, executives said. The company expects a gradual increase in sales and profitability in the second half.

Motorola expects 2001 worldwide cell phone shipments to be 425 million to 475 million units, up from 410 million last year but well below industry estimates made earlier this year of up to 600 million.

Motorola also is considering the sale of other nonstrategic assets, following its sale of overseas cellular assets that raised $1 billion, Growney said.

He would not specify what businesses are under consideration, but he told Reuters the semiconductor unit was not a candidate.

The company said its semiconductor unit’s second-quarter sales will fall significantly and will report an operating loss compared with a gain last year. Motorola expects industry sales to be 10% to 15% lower this year and then to grow by 15% to 20% in 2002.

Motorola’s stock closed off 10 cents at $12.90 in heavy trading on the New York Stock Exchange.