Motorola Inc has said that after its disastrous second quarter (CI No 3,447), it doesn’t expect things to improve in the short term, and Motorola has reduced its own predictions and expects both sales and earnings to be flat in the third quarter, excluding this quarter’s $1.98bn one-time charge announced in June. Across the whole […]
Motorola Inc has said that after its disastrous second quarter (CI No 3,447), it doesn’t expect things to improve in the short term, and Motorola has reduced its own predictions and expects both sales and earnings to be flat in the third quarter, excluding this quarter’s $1.98bn one-time charge announced in June. Across the whole company, orders received were down 16% against the year ago quarter and international markets saw a decline in sales, with Latin America the only one producing revenue growth. Motorola president and chief operating officer Robert Growney sees no easing of the pricing pressures that got the company into the trouble in this quarter, and says gross margins could be further eroded in the third quarter. Motorola executives have said they cannot predict when the company will return to profitability and growth. According to Growney the company’s outlook concerning semiconductor sales is not optimistic for the next year, in fact Motorola is suffering from the affects of a three-year world semiconductor slump, which seems without an end in sight. But Growney is keen to predict when savings due to the restructuring will begin to roll in. He says that – starting in the third quarter – cost savings of $100m will be realized, growing to the full level expected in the third quarter 1998, of $190m a quarter or $750m a year. But a clearer indication of where Motorola went wrong has finally been given. Growney said the that semiconductor division would be losing 9,000 staff, the bulk of the 15,000 employees due to go in the restructuring, implying that semiconductor is responsible for the majority of its long term problems. Motorola is also planning to sell off some of its businesses, but Growney would give no hints on potential disposals, merely making it clear that it will maintain a planned $2.0bn investment in its semiconductor business. In the third quarter Motorola will see its global communications satellite network operator, Iridium LLC book its last start up losses. Iridium, in which Motorola has a 19% shareholding, will book expenses of $240m, before it starts commercial phone and pager services on September 23. For the launch Motorola is starting the manufacture of specialized Iridium pagers and global mobile phones this month, and is due to announce a range of new digital mobile handsets which it hopes will reinvigorate the cellular businesses. But hopes for recovery are in semiconductor, paging and cellular operations, the very businesses which are to bear the brunt of the cuts.