A small break for Motorola’s Q2

Motorola’s stock was up nearly 14% at mid-day trading as the company reported better-than-expected second-quarter results and indicated it would record a slight profit in the fourth quarter.

Motorola’s cost-cutting measures appear to be working. President Edward Growney told analysts today that the company had trimmed 24,000 jobs through the first half of the year and he expects cuts to total 30,000 by the end of the year. The company had previously expected to cut 26,000 jobs in 2001. The cuts helped Motorola slash its total debt to $6 billion at the end of the second quarter from $7.2 billion at the end of the first quarter and increaseed cash by $400 million to $4.8 billion, Growney said.

Motorola reported a second-quarter operating loss of $232 million, or 11 cents per share, excluding special items, compared with $551 million, or 25 cents per share, in the second quarter 2000. Motorola had warned in April that its second-quarter earnings would be worse than its first-quarter loss of 9 cents a share. Analysts had expected Motorola to record a loss of between 10 cents and 15 cents per share.

“Continued improvement in the balance sheet was a positive surprise,” said a UBS Warburg research note. “The company showed solid cost savings in the quarter, offsetting weaker top-line revenues.” Motorola reduced its net debt by nearly $1.2 billion to $6 billion, the firm noted.

Motorola also posted better-than-expect profitability in its historically lagging handset business where it lost $237 million versus UBS Warburg’s estimate of $309 million. Handset orders increased sequentially to $2.9 billion.

“I’m pleased to report we’re showing good progress,” said Mike Zafirovski, head of Motorola’s phone unit. He said Motorola’s share of the global handset market surpassed the 15% mark for the first time since the first quarter of last year, up from 13.2% at the end of the first quarter.

Motorola’s semiconductor business continues to be a dark spot for the company though. It posted an operating loss of $381 million compared with a $176-million profit a year ago. Sales declined 38% to $1.3 billion in the second quarter, while orders dropped 51% to $1 billion.

Fred Schlapak, president of Motorola’s semiconductor business, said global semiconductor sales are expected to fall 15% to 20% this year, but a recovery is expected in the second half.