On strong Q4 earnings, Motorola warns of weak Q1

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Chipmaker Motorola Inc. -- one third of the AIM (Apple, IBM, Motorola) partnership that created the PowerPC chip in the mid-90s -- has posted its fourth quarter and year end revenue numbers. Despite a strong year-end report that caps two consecutive quarters of profit, Motorola is predicting a weak first quarter moving forward.

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Motorola reported $174 million in earnings for the quarter on $7.5 billion in sales. That's a 3 percent increase in sales year to year; Motorola posted a $1.2 billion loss for the same quarter last year.

Motorola COO Mike Zafirovski said that each of the company's six major business segments achieved positing operating earnings for the second consecutive quarter, including the company's beleaguered semiconductor business.

Highlights of the quarter included $3.3 billion in sales for the Personal Communications Segment (PCS), Motorola's cell phone business. That's up 11 percent year to year. Semiconductors saw a 15 percent boost in sales for the quarter to 1.3 billion, with customers taking stock of DragonBall MXL processors, MPC500 chips, and more.

Motorola's Global Telecom Solutions Segment (GTSS) posted an 11 percent decrease in sales to $1.2 billion. The company attributes the drop to a global decline in capital expenditures by wireless service providers. In fact, the segment posted a $22 million operating loss for the quarter according to Generally Accepted Accounting Principles (GAAP) largely due to a $22 million hit in employee severance charges; the segment reported $3 million in operating earnings for the quarter excluding those "special items."

Motorola's Commercial, Government and Industrial Solutions Segment (CGISS) posted $1.2 billion in sales for the quarter, a 2 percent drop that the company blames on U.S. government agencies dragging their heels in the wake of homeland security programs. Regardless, the segment still posted $189 million in earnings for the quarter, with highlights including big contracts from the District of Columbia, Taiwan High Speed Rail Corp., and package delivery service FedEx.

The Broadband Communication Segment likewise saw a quarterly drop, down 16 percent to $489 million. Motorola attributes the drop to an ongoing decline in cable equipment purchases. The segment still posted a $33 million profit for the quarter, with wins from several cable companies including time Warner Cable, CableOne, and Mexico's Cablemés.

The Integrated Electronic Systems Segment, meanwhile, saw $570 million in sales for the quarter, a 6 percent leap. The segment posted $26 million in earnings for the quarter, compared to a $99 million loss for the same quarter a year ago. Motorola noted strong performance from its Automotive Communications and Electronic Systems (ACES) group, which sells components used in automotive chassis, powertrains and other products.

Motorola Chairman and CEO Christopher B. Galvin noted that his company exceeded "the vast majority" of the financial goals it set for itself in 2002, and plans to stick to a five-point plan that they adopted two years ago in the face of miserable results. Galvin added that Motorola anticipates sales of between $6.0 and $6.2 billion for the first quarter, with earnings per share around break-even to $.02.

"Our objective is that 2003 will produce the next positive phase of our turnaround and Motorola's renewal," said Galvin.

This story, "On strong Q4 earnings, Motorola warns of weak Q1" was originally published by PCWorld.

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