Motorola has combined the worldwide slump in semiconductor prices with poor vision in its mobile communications markets to turn in its worst quarterly performance ever. After warning in early June that 15,000 staff would lose their jobs in a company-wide reorganization, Motorola has reported second quarter net losses of $1.33bn against profits last year of $268m, while total revenues slid 7% to $7.02bn. The figures include a $1.98bn charge for manufacturing consolidations, cost reductions and restructuring steps intended to improve financial performance, Motorola said. With its share price dropping fast since August last year, Motorola has had its back to the wall for some time. But having just pushed through nearly $2bn in charges in a single quarter, the US chip giant claims to have made pre-charge profits of $0.01 per share, contrary to analysts’ expectations. Motorola began dropping hints in June about possible operating losses before including reorganization costs, and industry watchers have been bracing for the worst. Now, however, a pre-charge profit of a penny a share is what Motorola is offering its seemingly over pessimistic investors. It might be wise, however, to ponder exactly how rigid the division is between operating expenses and one off re-organization charges. Quarterly reports are not audited figures, and Motorola’s investors are never likely to see a detailed analysis of this $2bn charge, or how the company accounts for the accrued costs of the reorganization going forward. But this charge, $2bn of expenses booked without any additional detail, nullifies Motorola’s entire reported earnings for the whole of 1997 and 1998 combined, which is probably the time frame over which the company knew it would have to make radical changes. But Motorola is still holding out in its earnings statement, a half-year pre-charge profit of $0.25 per share. Motorola’s chief operating officer, Robert L Growney, reiterated the previously stated aims of the charge, namely to save his company $750m in excess expenditure every year. But this goal, hinted Growney, will take at least twelve months to complete, with the corresponding gains to kick in gradually over the next several quarters. Meanwhile, CEO Christopher Galvin said he would be announcing plans, over the next few days, to make Motorola a more collaborative company capable of sharing resources and co-operating on key business issues. Galvin, the grandson of the founder of Motorola, has complained about the company’s divisive corporate structure almost since the day he took over as CEO at the start of last year. Meanwhile, reporting by division, Motorola had a mixed set of results for the quarter, with the overall trend heading sharply downward. In the cellular division, sales fell sharply while the group was partially rescued by increased sales in the cellular infrastructure group. Overall, sales declined by 1% to $2.78bn while orders saw a worrying decline of 11%. Before reorganization charges, Motorola claims the division made an operating profit, albeit a reduced one, but would not give further details. The semiconductor division has watched sales fall by 11% to $1.81bn while orders are down 25% on last year. It also made operating losses against a profit last year. Motorola’s messaging and media division fumbled badly, with sales falling 32% to $771m while orders fell 35%, mainly due to low sales of pagers in North America, the company said. The only division with anything positive to say was the Land Mobile Products division which saw sales rise 18% to $1.37bn, led by digital network infrastructure sales and TETRA equipment contracts (terrestrial trunked radio). á
