Motorola Inc, the second-biggest maker of mobile phones, said third-quarter sales will be less than expected and boosted planned job cuts by 2,000, to 32,000. The stock dropped 15 percent.
Sales will be little changed in the third quarter from the second quarter's US$7.52 billion because of declining sales of equipment that runs wireless-phone networks, Motorola said. The company previously forecast a 5 percent increase.
For Chief Executive Christopher Galvin, shrinking revenue at the cellular-network business comes on top of mounting losses at Motorola's semiconductor and phone units and declining sales at the cable set-top box division. In the second quarter, sales of wireless-network equipment fell 14 percent from a year earlier to US$1.68 billion, representing 22 percent of Motorola's revenue.
"Until things get better, I would doubt that anyone spends a significant amount of money on wireless infrastructure," said Ken Turek, manager of Northern Trust Corp's Northern Global Communications Fund, which owned 80,500 Motorola shares as of March. "There's nothing [Motorola] can do about it."
Since December, he had announced 30,000 job cuts in an attempt to return the company to profitability, before items, in the fourth quarter.
Wireless-service companies are delaying purchases of equipment to handle additional calls as mobile phone sales growth slumps. Ericsson AB, the biggest maker of wireless-network gear, earlier this week said it sees no signs of a recovery in demand for its main products next year. Motorola's equipment division is its second-largest unit behind mobile phones and pagers.
Shares of Schaumburg, Illinois-based Motorola fell US$2.46 to US$13.94. The stock has declined 60 percent in the past year. Motorola had 147,000 employees at the end of last year.
Motorola expects a third-quarter loss before items of US$0.05 to US$0.08 a share, narrower than the second-quarter's US$0.11 loss. Analysts polled by Thomson Financial/First Call had forecast a loss of US$0.05.
In the year-ago period, Motorola reported net income of US$531 million, or US$0.23, on sales of US$9.49 billion.
Yesterday's share decline comes after many of the largest fund managers bought Motorola stock in the second quarter, according to Bloomberg data. Fidelity Investments, the biggest US mutual-fund manager, added 17.4 million shares to finish the quarter with 54.8 million shares, while Putnam Investments bought 25.3 million shares for a total of 43.9 million.
Motorola won't give a fourth-quarter financial forecast until next month, President and Chief Operating Officer Robert Growney said at the Salomon Smith Barney Tech2001 Industry Conference in New York. In July, the company said it expected fourth-quarter sales to rise 5 percent from the third quarter and to be "slightly profitable" excluding items.
He said the company won't provide an estimate for next year.
"We've learned new lessons this year," Growney said in his presentation. "We haven't profited to the point we should have from our innovations."
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