Motorola's Q2 chip orders fall 51%, net loss widens to $759 million

Motorola's Q2 chip orders fall 51%, net loss widens to $759 million
SCHAUMBURG, Ill. -- Continued problems in its chip and cellular-phone businesses caused Motorola Inc. to report a net loss of $759 million for its second quarter of 2001, compared to a profit of $204 million in the like period a year ago.

The troubled company also reported sales of $7.5 billion in the quarter, a 19% decline from a year ago. Including pro forma adjustments, it incurred a loss of $232 million, or a deficit of $0.11 cents per share, compared with a profit of $551 million, or $0.25 cents per share, a year ago.

The company did beat analysts' projections. It was projected to show a pro forma loss of about $0.12 a share.

But Motorola's chip business remains in the tank. Its total chip sales were $1.3 billion in the period, a 38% decline from a year ago and a 12.2% drop sequentially. Orders were $1 billion in the quarter, a 51% decline a year ago and a 9% drop sequentially.

The segment had an operating loss of $381 million in the period, compared to earnings of $176 million a year ago.

Chip sales were down "significantly" in Europe and the Americas, according to Motorola. Asia/Pacific and Japan were also down, the company added.

In the cellular-phone business, Motorola's sales were $2.5 billion in the period, down 25% over a year ago. The segment incurred an operating loss of $237 million versus operating earnings of $136 million a year ago. The decline is due to lower worldwide demand and a drop in average selling prices for wireless handsets.

"The industry's fundamentals are weak and the imbalance between inventories and demand has spilled over into Europe," said Christopher B. Galvin, chairman and chief executive of Motorola. "Motorola sensed the downturn of the telecom and semiconductor industries over 10 months ago and began reducing its costs early," he said.

Galvin was also upbeat in some respects. "Our wireless telephone business is already beginning to show signs of recovery and we expect to see an increase in customer demand, especially for our new 2.5G products, starting in the third quarter," he said.

"The semiconductor industry should resume a double-digit growth pattern next year," he added. "Inventories are expected to return to normal levels."