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Motorola reports Q2 sales to meet or beat forecast

Motorola Inc, the world's second-largest maker of mobile phones, will meet or exceed its forecasts for sales and a loss excluding some costs this quarter, President Edward Breen said. The shares rose 8.4 percent.

In April, the company forecast second-quarter sales will fall to a range of US$6.3 billion to US$6.4 billion. It predicted a loss, excluding severance and certain other costs, of US$0.04 a share.

Chief Executive Officer Christopher Galvin, who has presided over a 23 percent share-price decline since taking the reins in 1997, has vowed to cut enough costs to return the company to profitability, excluding severance and certain other costs, this year. Last year, the company founded by Galvin's grandfather had its first annual loss before restructuring costs in 71 years.

"They set the bar at realistic levels, which is important," said Ted O'Connor, an analyst at Cambiar Investors Inc, which manages US$2.3 billion and held 3.45 million Motorola shares as of March 31. "It does seem that they're getting the costs out of the business."

Breen, at a Bear Stearns investor conference in New York, said, "We are confident that sales will meet or slightly exceed our prior guidance of US$6.4 billion."

The second-quarter loss, excluding certain expenses, will narrow to US$0.04 a share or better, he said.

Schaumburg, Illinois-based Motorola will announce further cost-reduction measures this month, Breen said. He didn't mention further job cuts, and reiterated that the company is reducing the size of its workforce to 100,000 by year's end from a peak of 150,000 two years ago. There were 111,000 workers at year's end.

Shares of Motorola rose US$1.21 to US$15.66, the biggest percentage gain in five weeks. The shares, which traded at a split-adjusted US$20.42 when Galvin became CEO, peaked at US$61.54 in March 2000.

Motorola reiterated that 2002 sales will fall 5 percent to 10 percent from US$29.5 billion last year; and that excluding certain costs, the company will be profitable in the third quarter and full year. Motorola said in March it will have a second-straight annual net loss, without predicting an amount.

Analysts polled by Thomson First Call, on average, expect Motorola's 2002 sales from ongoing operations to fall to US$27.2 billion.

Severance and other costs, including non-cash expenses, during the second quarter are "going to be on the larger side rather than the smaller amount," Breen said, without being specific.

Motorola spokesman Scott Wyman declined to elaborate.

Analysts polled by First Call expect a loss, excluding certain costs, of US$0.04 a share this quarter.

In the second quarter of last year, Motorola had a net loss of US$759 million, or US$0.35 a share, on revenue of US$7.49 billion.

Excluding severance, exited businesses and other items, the loss was US$238 million, or US$0.11 a share.

Breen's comments came a day after Nokia Oyj reduced its Q2 sales forecast while saying the company will boost its market share.
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