Motorola expecting profits to fall again Lower chip prices, declining demand among the reasons

September 12, 1996|By BLOOMBERG BUSINESS NEWS

SCHAUMBURG, Ill. -- Motorola Inc. said it expects another quarter of disappointing earnings, as lower chip prices and waning demand push third-quarter profit below the second quarter's.

In addition, sales of its pagers and modems are weak abroad, and Nokia and Ericsson are cutting into Motorola's market-leading position in the $20 billion-a-year cellular phone arena.

The shortcomings in Motorola's two main businesses are leading some investors to question its reputation as a technology innovator.

It has missed earnings estimates for five of the last six quarters and lagged its rivals in products including digital phones, prompting a 40 percent plunge in its shares over the past year.

The profit warning is the latest bad news for Motorola, whose stock is down 11 percent this year alone as it faces a slowdown in chip sales to customers from carmakers to personal computer companies.

Motorola also has struggled with increased competition and lower prices in the cellular business.

Motorola stock fell $1.50 to $49.25 yesterday on volume of 10.36 million shares, making it the most active U.S. stock. Last Sept. 18, the stock reached a high of $81.75.

The company said third-quarter results, due Oct. 7, will be "significantly below" the second quarter's, defining that as 25 percent lower or more. Based on an estimate of 50 cents a share cited by the company, that translates to 38 cents a share.

In the 1995 third quarter, Motorola had profit of $496 million, or 81 cents a share, on sales of $6.85 billion.

Second-quarter profit was $326 million, or 54 cents, on sales of $6.83 billion.

Motorola was expected to earn 55 cents a share in the third quarter, the average estimate of 20 analysts surveyed by Zacks Investment Research.

"We've been disappointed that [the problems] extended longer than we thought," said Dave Duncan, vice president at Rittenhouse Financial Services Inc. in Radnor, Pa., which cut its stake by 43 percent after Motorola's second-quarter earnings dropped by almost a third.

Pub Date: 9/12/96

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