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The Honolulu Advertiser
Posted on: Friday, September 7, 2001

Motorola cuts 2,000 more jobs

By Dave Carpenter
Associated Press

CHICAGO — Motorola Inc. dashed hopes of a long-awaited turnaround this fall, announcing yesterday that the weak market for telecommunications equipment is resulting in flat sales this quarter and forcing it to cut 2,000 more jobs.

The bleak outlook sent the company's stock plunging 15 percent.

The cell phone and semiconductor giant has now slashed 22 percent of its work force since December. Officials held out the possibility of more, characterizing cost-reduction moves as ongoing.

Motorola, mired in a long slump, said softer-than-expected demand for telecom equipment has resulted in sales being flat in the third quarter rather than up 5 percent from the second quarter as anticipated.

It blamed slower growth in the wireless infrastructure market, resulting from delays in capital expenditures by wireless service providers.

Motorola president and chief operating officer Robert Growney complained that Wall Street had misconstrued the announcement as a profit warning and overlooked a key point: Motorola's cell phone business is finally improving, thanks to a series of new phones that have are boosting sales.

He indicated that the cellphone and pager business, Motorola's biggest, is on track to return to profitability by year's end, although he declined to estimate fourth-quarter results and acknowledged that the outlook for 2002 remains "obviously weak."

"This anticipated result is somewhat less than we had hoped for, but we are seeing sequential improvements in earnings ... unlike comparable industry participants," Growney told analysts at a tech industry conference in New York.

The job cuts will come from its Global Telecom Solutions Sector, which handles cellular phone network development and manufacturing. That business, based in Arlington Heights, Ill., has facilities in Texas, Arizona, Florida, Canada, Brazil, Britain, Israel, China, Ireland, Japan and India.

Motorola has now announced 32,000 job cuts dating to last December, shrinking the work force to 115,000 by year's end.

Growney said the company expects to report an operating loss of 5 cents to 8 cents per share in the third quarter, including pro forma adjustments, which remains within range of analysts' consensus estimate of a 5 cents per-share loss.

That will make four straight money-losing quarters for Motorola, which said the pending loss will be smaller than the $232 million operating loss of the second quarter.

Growney cited increased sales and improved profitability in the cellphone division, but added: "All other segments of the company are expected to experience sequential declines in sales and profitability."

The semiconductor unit, the company's second largest, is suffering from weaker sales and profitability this quarter, he said, although orders are higher.

Motorola, the leading U.S. cell phone maker, is in the middle of its third restructuring since 1998 as it tries to improve sagging profit margins and narrow the huge industry lead of Finland's Nokia. It improved its market share to 14.8 percent from 12.7 percent in the second quarter, according to Gartner Dataquest research, but the weakened economy has weighed on its comeback efforts.

Analyst Vivian Mamelak of Arnhold and S. Bleichroeder said the latest setback reflects industry woes rather than Motorola missteps.

"There's gloom and doom going on out there in telecom equipment," said the analyst, who called the announcement unsurprising.

"Any hope for a second-half rebound is pretty much out the window right now," she said. "Even for '02, there doesn't seem to be a heck of a lot of light at the end of the tunnel."