Motorola's poor results expected

(Telephony) Motorola had prepared Wall Street for dismal fourth-quarter results, and it delivered this week.

The company posted earnings of $335 million, or 15 cents a share, down 41% from $564 million, or 25 cents per share, a year ago, amid higher sales.

"Despite the higher sales, increases in manufacturing costs and operating expenses caused operating profits to decline," said Robert Growney, president and chief operating officer of Motorola. "We have taken steps to reduce the cost of structure in our manufacturing activities and to control operating expenses. Further steps will be taken in 2001 to return the corporation to generating growth in its earnings."

Mike Zafirovski, president of Motorola's personal communications services division said results in the handset business were disappointing. PCS revenues were about $97 million, below analyst firm First Union Securities' estimate of $3.58 billion. Handset margins fell to 2.2%, even after excluding one-time charges related to the discontinuation of unprofitable models.

"We do not expect to see significant improvements in the next three to six months," he told analysts during the company's quarterly conference call.

Stiff competition in the low-end market will continue to put pressure on handset margins, executives said.

"We reiterate our market perform rating and see no reason to take new positions in the shares, despite the current valuation, until we begin to see concrete improvement in PCS and a more firm outlook for semiconductors," said First Union.