Motorola reports a miss, predicts upturn in second half

(Telephony) Motorola announced a miss on its first-quarter earnings, coming in below the reduced guidance it had provided in February.

For the quarter ending March 31, Motorola reported sales of $7.8 billion, down from $8.8 billion for the same period a year earlier. Pro forma operating loss for the quarter was $206 million, or 9 cents per share, compared with pro forma earnings of 21 cents per share year over year. Consensus analyst estimates on First Call/Thompson Financial had Motorola posting a loss per share of only 7 cents.

Leading the losses for Motorola was the company’s personal communications segment, which handles handset production for Motorola. Year over year, the segment’s sales were down 29% to $2.3 billion, giving it an operating loss of $402 million.

The announcement signals the end of Motorola’s worst quarter in several years. In February the company said it would not meet its earnings guidance of 12 cents per share for the quarter. That announcement was accompanied by repeated rounds of layoffs that, ultimately, will reduce Motorola’s headcount by about 26,000.

Despite the bad news, the company expects its overall sales to improve in the second quarter, said Robert Growney, Motorola’s president and chief operating officer.

Even with an increase in sales, Growney said the company expects the second quarter to produce a loss “a few cents more that the first quarter’s loss.” This can be traced to reduced returns on investments because of the sale of some investments, increased incentive compensation--a factor that was lower than expected in the first quarter--and lower manufacturing margins.

The company expects a “gradual upturn” in sales and profitability in the second half with annual sales somewhat lower than last year, Growney said.

Addressing the balance sheet, which has been the subject of Wall Street rumors in recent days, Growney insisted Motorola has ample resources, citing $4.4 billion in cash, cash equivalents and short-term marketable securities and $3.9 billion in total credit facilities at quarter end.

“Our entire management has been is now and will be intensely focused on maintaining a strong balance sheet and improving operating cash flow. Cash flow from businesses, including net proceeds from investments was positive for the first quarter and we anticipate it will be positive for the year,” he said.

As proof of this Growney offered net accounts receivable, which was down from $7.01 billion in fourth quarter 2000 to $5.64 billion in the first quarter 2001, and net inventories, which fell from $5.24 billion to $4.53 billion.