Though the news is no surprise to financial analysts who have been tracking the company’s performance, semiconductor maker Motorola posted its fourth consecutive loss and noted a 25 percent decrease in quarterly sales in its most recent financial report. If there’s a silver lining to this cloud, it’s that the manufacturer expects to return to profitability some time in the second half of the year, and if its numbers go as expected, Motorola may even post a profit for the year.
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Motorola reported $29.5 billion in sales for the year, down from $36.8 billion reported in 2000. All told, the company lost $697 million last year, compared with $2.0 billion in net earnings for 2000.
Motorola president and COO Edward Breen indicated that Motorola is suffering the results of weak end markets, but he said the company is improving its strategic focus and is reducing its cost structure. Breen praised the performance of Motorola’s Personal Communications, Broadband Communications, Commercial, Government and Industrial Systems segments — omitting Semiconductor all together. Motorola’s Semiconductor segment manufactures the PowerPC chip used in Apple’s Mac systems.
“We are confident we are taking the right steps to position the company to return to the level of profitability that it is capable of generating as its end markets recover,” said Breen.
Motorola also reported special items that ended up creating a net charge of $1.7 billion pre-tax, or $1.1 billion after tax.
Semiconductor sales, orders slow dramatically
Although Motorola did have positive news to report from other segments of its operations, it’s clear that the Semiconductor segment turned in disappointing fourth quarter results. Motorola noted a drop in semiconductor sales of 41 percent for the quarter — down to $1.1 billion. Orders also dropped, a 36 percent, to $1.0 billion.
Semiconductor ended up costing Motorola $335 million, compared to earnings of $171 million a year ago. Motorola blames the shortfall on the “sharpest decline in history” for the semiconductor industry.
Motorola’s Semiconductor segment noted plans to provide Benq Corp. with mobile communications chips built on the i.250 architecture. New PowerPC-based technology was also revealed during the quarter, including the MPC8250, intended for SOHO routers; the MPC500 series, designed for appliances, vehicles and other applications; and the MPC600, designed for avionics and industrial applications.
The outlook for 2002
Motorola chairman and CEO Christopher B. Galvin said that 2001 was one of the most difficult years in the history of telecommunications equipment and semiconductors. He cited the global recession, compounded with last September’s terrorist attacks, as mitigating circumstances for industry’s woes.
Galvin suggested that Motorola’s losses will continue for the first half of 2002 as well, but things should improve from there. “We expect to return to profitability in the second half of the year and be profitable for the full year, barring any unforeseen political or economic disruptions,” he said.
Galvin indicated that Motorola has a five-pronged strategy to return to profitability. The strategy includes a shakeup in the company’s management team; stabilizing the balance sheet; reducing costs and manufacturing facilities; producing new products; and re-evaluating the business plan.
“The work is not complete. But due to actions taken in 2001 and our continuing efforts to innovate, find new business efficiencies and realize cost reductions, we enter 2002 a much leaner, more competitive and highly energized company. This is our mandate,” said Galvin.