Copyright 2002 Toronto Star Newspapers, Ltd.

Toronto Star…06/13/2002

From LexisNexis

Motorola Inc., the Number 2 maker of wireless telephones, said yesterday it will meet or beat its second-quarter guidance, citing growth in all its businesses, and affirmed its forecast for a profitable third quarter.

The company, which has posted losses for five consecutive quarters, also said it expects to show a profit for the full year.

Motorola president and chief operating officer Edward Breen told investors that growth is returning to the company's businesses and it expects to meet or beat its April guidance for the second quarter of a loss of 4 cents a share on revenues of at least $6.4 billion (US).

"We are confident that sales will meet or slightly exceed our guidance," Breen said. "We are confident that our operating results, excluding the impact of special items, will meet or be slightly favorable to our prior guidance of a loss of 4 cents per share."

Motorola shares rose $1.21, or 8.37 percent, to $15.66 in heavy trading on the New York Stock Exchange yesterday.

The stock has declined less than 1 per cent since the start of the year, outperforming the Standard & Poor's communications equipment index, which has fallen 41 percent in the same period.

Motorola's optimism was in contrast to rival Nokia, the world's largest maker of cellphones. Nokia Tuesday warned second-quarter sales would fall 2 percent to 6 percent from a prior target of up to 7 percent growth. It also said sales in its key mobile phone unit would grow by only zero to 4 percent, less than half the 10 percent growth it had signalled as recently as April.

J.P. Morgan analyst Edward Snyder said Motorola's cellphone and semiconductor units must be performing better than expected.

"It further indicates that Motorola is probably stronger than people expect in (cell) phones," he said. "It indicates that maybe Motorola is fitter than Nokia let on."

Breen said Motorola expects further market share gains this year in the global cellphone market, which saw its first ever decline in unit sales last year. He said the company can boost its share in the second quarter to 18 percent from 17 percent in the first quarter. It trails Finland's Nokia, which makes more than one in three cellphones sold worldwide.

Breen also said Motorola would make additional cost cuts that will be announced by the end of June. Snyder said the company's previous cost cuts are starting to bear fruit.

Motorola shareholders said Nokia had been overly optimistic and Motorola had set its bar low, but the US company also is moving in the right direction.

"They should be judged as a company that seems to be maybe gaining a little bit of market share and doing a good job," said Henry Asher, president of the North Star Group, a New York money manager.

However, Motorola needs to get past the restructuring and finish its cost-cutting, said American Express Financial Advisors analyst Kurt Lauber.

Breen said that Motorola, which also makes wireless telecom gear, semiconductors and set-top boxes for cable television, expects to incur one-time charges "of a larger rather than smaller amount" in the second quarter, and they might "bleed" into the third quarter.