announced it first quarterly loss in 15 years, after the markets closed on Tuesday. In a forward-looking statement made during a conference call yesterday, Motorola’s President and CEO Bob Growney warned that Motorola expects to incur a few cents larger loss per share in the second quarter of this year.
Motorola reported sales of $7.8 billion in the first quarter of 2001, down eleven percent from $8.8 billion in the first quarter of 2000. Including pro forma adjustments, Motorola incurred a loss of $206 million or nine cents a share. In Q1 of last year, Motorola earned $481 million or 21 cents per share. Excluding pro forma adjustments, Motorola’s loss for this quarter was $533 million or 24 cents per share.
Of paramount importance to Apple is Motorola’s semiconductor sector, which as a portion of its operations manufactures the processors Apple uses in its computers. Fred Shlapak, President of Motorola’s Semiconductor Sector, said that the semiconductor industry is experiencing its sharpest downturn in history. Citing high component inventories and low consumer demand, Shlapak said that “from the peak of nearly 50 percent growth in the second quarter of last year, we have seen a rapid and deep decline to a -5 percent pace in the first quarter of this year.”
Shlapak reported that semiconductor orders were down 47 percent and sales down 22 percent from the first quarter of last year. Nevertheless, Shlapak said that Motorola still expects a semiconductor industry recovery to begin in the latter half of this year. Motorola invested $2.4 billion last year for advanced capacity, but expects to spend less than $750 million this year in its 0.13-micron HiPerMOS 7 processor production technology and other incremental improvements. No comments were made regarding Apple; however, Shlapak did note numerous PowerPC design wins in the embedded and networking markets.
Motorola hopes to return to profitability as quickly as market conditions allow. Growney said that Motorola has so far reduced its workforce by almost 13,000 employees — 3,000 of those being contract employees. He also said that Motorola’s targeted workforce reduction is approximately 26,000. “This reduction along with other steps taken are expected to allow us to avoid about $1.9 billion in operating costs that we would otherwise have incurred this year,” said Growney. Motorola has a workforce just shy of 150,000 employees.
Growney went on to say that the company expects sales to increase somewhat next quarter over this quarter, but still be lower than those from the second quarter of last year. He offered three reasons for his Q2 warning. First, Motorola had deferred margin profits from infrastructure sales in cellular companies that Motorola has now sold its investments in. The company expects smaller deferred margin profits in the second quarter. Secondly, Motorola paid out less incentive compensation in Q1 than was accrued in 2000, and Motorola may need to cover this expense. Finally, Motorola expects a lower manufacturing margin due in large part to an unfavorable mix shift in sales and a continuing decline in semiconductor sales.