Motorola: 1Q sales, earnings will fall short

Motorola announced today that it does not expect to achieve its first-quarter 2001 sales guidance of $8.8 billion, or its earnings guidance of 12 cents per share, as reported on January 11, 2001.

The company blamed a slowdown in first-quarter orders, due to a weakening U.S. economy and inventory corrections that are taking place throughout the worldwide telecommunications industry, for this setback. Moreover, should these conditions continue, the company predicts that it will incur an operating loss for the quarter.

“The personal communications segment is experiencing significant weakness in orders and sales versus our expectation at the beginning of the quarter,” said Bob Growney, Motorola’s president and CEO. “We believe that the this weakness is the result of current industry-wide conditions and not a loss of market share. These conditions include excess inventories in the distribution channel, slowing overall market growth and some resulting increase in pricing pressures.”

The news wasn’t all bad for Motorola, though. The company’s global telecom solutions segment is expecting double-digit growth in sales and orders for the quarter, despite the fact that demand in Europe for GSM equipment has softened, and orders and sales have slowed in Asia. However, Growney said the slowdown in Asia can be attributed to orders being shifted from the first to second quarter.

In addition, the company expects first quarter sales for its broadband communications segment to increase significantly compared to the year previous, due to continued growth in the digital set-top and cable modem segments.

“However, first quarter orders may show little, if any, growth, as they have been negatively impacted by tighter inventory management practices by broadband operators, as well as a reduced rate of new subscriber growth,” Growney said.

To offset its first-quarter sales and earnings shortfall, Motorola announced that it will continue to actively adjust its cost structure and take additional cost reduction steps in the future.