Motorola shifts $3 billion to U.S. to repay debt

Telecom company expects no effect on third-quarter earnings

October 09, 2002|By BLOOMBERG NEWS

SCHAUMBURG, Ill. - Motorola Inc., the world's second-largest maker of mobile telephones, said yesterday that it moved about $3 billion in cash to the United States from overseas to have the money more accessible to repay debt.

The move will cost the company about $50 million in taxes but will have no effect on third-quarter earnings, Motorola said in a statement. Company spokesman Scott Wyman said Motorola earned the cash from foreign operations. He declined to identify the countries where the money had been held.

Motorola had $6.49 billion in cash and short-term investments, and $8.94 billion in debt at the end of the second quarter and said it had about the same amount of cash and investments at the end of last month. The company, which has posted net losses for six straight quarters, says it intends to pare debt through next year.

"The concern, obviously, that people had is, what good does cash do you if it's not in the United States?" said Bruce Hyman, a telecommunications-equipment debt analyst at Standard & Poor's Corp.

Motorola needed to have the cash in the United States in case of an unexpected demand from a creditor for an overnight payment, Hyman said. The issue isn't necessarily specific to Motorola, he said.

The transfer gave Motorola $4.2 billion in cash in the United States at the end of the third quarter, up from $1.3 billion three months earlier.

Motorola's shares rose 25 cents yesterday to $9.75 on the New York Stock Exchange, after dropping during the day to $8.65, their lowest since February 1993. The shares have declined 35 percent this year.

In a statement, S&P said the move "was designed to allay investors' concerns about the company's financial flexibility, given the unsettled conditions in the communications equipment industry."

Hyman said yesterday's news has no effect on his BBB rating on Motorola's debt, two levels above junk.

"There's simply been so much noise flailing around the industry about liquidity crises," he said.

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