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Motorola may post loss
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February 23, 2001: 12:30 p.m. ET
Mobile phone maker cites weak sales, economic slowdown for reversal
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NEW YORK (CNNfn) - Motorola Inc., the world's second-largest supplier of mobile phones, warned Friday it will not meet its first-quarter sales and earnings targets -- and could post a loss -- if sluggish sales continue due to weakness in its various businesses.
During a conference call Friday, Motorola also said it plans to announce cutbacks or closures at four of its 50 plants worldwide, and that it is considering another three in its continuing efforts to cut costs. It also plans to reduce capital expenditures for the year to $2.5 billion from $4 billion last year.
A Motorola spokesman declined to say which plants could be affected. The company previously streamlined 6 plants.
 Motorola's shares fell $1.21 to $16.08 in Friday afternoon trading.
Shares of rival Nokia (NOK: Research, Estimates), the No. 1 mobile phone supplier, also took a hit in early trading. Its American depositary receipts (ADRs) were down $2.37, more than 10 percent, to $20.88 Friday. And shares of Qualcomm (QCOM: Research, Estimates), which said late Thursday that it expected a two-year delay in the rollout of third generation mobile phone technology, were pummeled, shedding $12.56, or 19 percent, to $54.38.
Motorola (MOT: Research, Estimates) warned last month that first-quarter results would be hurt by slowing sales in its handset and semiconductor businesses.
It said Friday that if the weakness persists it will fall short of its sales forecast of $8.8 billion and earnings guidance of 12 cents a share given last month, and may even post a loss from operations. It cited the economic slowdown and inventory cutbacks by customers for the weakness.
Motorola also said it will continue to search for further cost-cutting measures.
Motorola began dropping hints that first-quarter sales could fall short of expectations during a Jan. 11 conference call, when it said it remained on track to hit Wall Street's targets but that it anticipated a slowdown in personal communications and semiconductor sales.
During the conference call with analysts Friday, Motorola's Chief Operating Officer, Bob Growney, said, "In personal communications, the sector is experiencing weakness in orders and sales versus our expectations as a result of current industry-wide conditions, and not a loss of market share." He added that he expects upcoming new products and strategic alliances to help strengthen the business.
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The warning comes just two days after the Schaumburg, Ill.-based company laid off nearly 300 employees at its cellular phone unit and disclosed plans to further trim costs in the division by $2 billion in the coming months.
That came after an earlier round of 2,500 layoffs Motorola announced in January at its Harvard, Ill., phone manufacturing plant, one of only two it operates in the United States, and the cutting of 2,870 jobs in December.
Motorola was the latest major technology firm to warn it will miss earnings targets. Late Thursday another tech bellwether, Sun Microsystems (SUNW: Research, Estimates), warned third-quarter results will fall short because of the perceived slowdown in the U.S. economy.
Credit Suisse First Boston Analyst Tim Long said Friday's news was not surprising, particularly on the semiconductor side, where orders have been softening industry-wide. The firm lowered its first-quarter estimates for Motorola from 12 cents a share to a loss of 4 cents.
"Certainly on semiconductor side we've seen a lot of Motorola's customers lowering revenue numbers, so on the demand side, it certainly has been softening with the likes of Sun and Nortel Networks (NT: Research, Estimates) lowering guidance number," Long said.
With a disappointing earnings season just winding down and surprisingly higher inflation numbers, economists and market strategists have been expecting warnings to begin piling up for the next quarter.
On Wednesday, Brocade Communications Systems (BRCD: Research, Estimates), a leading supplier of fiber-optic switches for computer storage networks, warned that sluggish sales will hurt its profit in 2001.
On Feb. 12, Emulex (EMLX: Research, Estimates), which offers products similar to Brocade's, warned order delays could hurt third-quarter results.
-- from staff and wire reports 
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