Motorola Confirms Guidance for Fourth Quarter, 2001
- Confirms Consensus Earnings Estimate For 2002 - Provides Guidance for First Quarter 2002 - Announces Initiatives Projected to Save $865 Million In 2002
Schaumburg, Ill. Motorola, Inc. (NYSE: MOT) announced today that the company still expects to achieve the estimates of fourth-quarter 2001 sales and earnings per share that it provided on October 10th, 2001. At that time, the company said that it expected fourth-quarter sales for ongoing operations to be flat to 3% higher versus the third-quarter of 2001. For ongoing operations third-quarter 2001 sales were $7.24 billion. The company continues to expect to incur an operating loss, on a pro-forma basis, of 4 to 5 cents per share in the fourth-quarter of 2001.
Robert L. Growney, president and chief operating officer, said "Based on our current view of investment community consensus expectations for the profitability of our different business segments for the 4th quarter, we expect the Commercial, Government and Industrial Systems and Personal Communications (wireless handsets) segments to exceed these current expectations, offset by lower than expected results in the Global Telecom Solutions and Broadband Communications segments. The company s Semiconductor Products and Integrated Electronic Systems segments are expected to achieve results close to consensus expectations."
With respect to profitability for the full year of 2002, Motorola is also confirming that company expects to be profitable in 2002 and believes that it can achieve the consensus expectation of 2002 annual earnings of 15 cents per share, on a pro-forma basis.
The company also announced today that it is taking further proactive actions this quarter, that are expected to result in projected savings and cost avoidance of approximately $865 million in 2002 and approximately $1.1 billion on an annualized basis thereafter. The greatest impact of these actions is in the Semiconductor Products segment.
As part of its ongoing and vigorous efforts to return to profitability, the company has already notified during this October-December 4th quarter approximately 4,100 additional employees company-wide that their positions are being ended. In addition, the Semiconductor Products Sector has identified manufacturing facilities, in addition to those announced earlier this year, that will be phased out over the next year, as part of its move towards its new "asset light" business model. Accordingly, approximately 4,000 of its employees are now being notified that their positions will be gradually eliminated over the next year. Beyond these efforts, the company will also reduce its employee population by approximately an additional 1,300 employees across its equipment manufacturing businesses. Therefore, the total of these actions is expected to result in a further reduction of approximately 9,400 employees company-wide, expected to occur over the next twelve months.
Motorola previously announced that approximately 5,500 jobs were transferred to other corporations, which acquired selected Motorola businesses or manufacturing facilities and its intention to reduce its employee population by approximately 33,500 through job eliminations from its peak of approximately 150,000 in August, 2000. With the actions described today, the total employee population reduction from peak level would be approximately 5,500 employees, which transferred to other companies, and 42,900 employees through job elimination, the latter expected to be completed by year-end 2002.
Special charges related to the implementation of these actions will be recorded primarily in the October-December 4th quarter of 2001, although the timing of certain actions will require some charges to be recorded in the first half of 2002. Management believes that these actions, when coupled with further ongoing and rigorous efforts next year to improve efficiency and competitiveness, will help to enhance the company s ability to return to profitability in 2002.
The company believes that, as a result of improvements in gross margins in its handset business, the significant initiatives to improve efficiency and competitiveness implemented during 2001, the additional initiatives announced today and other actions anticipated to occur in 2002, it can achieve the level of profitability in the consensus expectation for 2002 on a lower sales volume in 2002 than in 2001. The company believes that its sales for ongoing operations could be between 5 percent and 10 percent lower in 2002 than in 2001, due to reductions in capital spending by its customers for telecommunications infrastructure equipment in the wireless, broadband and wire-line markets. The company intends to achieve a cost structure that will allow it to be profitable for the full year 2002 under those circumstances.
Motorola s annual revenue has a well-defined and significant pattern of seasonality. The October-December quarter is typically the largest in revenue and the January-March quarter is typically the smallest in revenue on an annual basis. The seasonal October-December calendar quarter to January-March calendar quarter sequential sales decline has averaged approximately 14 percent over the last five years, 1996 through 2000.
The company has not previously provided specific guidance on its expected financial performance for the first quarter of 2002 or for the full year of 2002. The investment community has independently arrived at a consensus for the first quarter of 2002 that does not reflect the October-December fourth calendar quarter to January-March first calendar quarter sequential seasonal sales pattern that the company typically experiences.
Although the current quarter has not closed and a detailed forecast for the first quarter of 2002 has not yet been completed, the company expects that its typical year-end seasonal sales pattern will continue in the first quarter of 2002. The anticipated repetition of the historical 1996 through 2000 October-December to January-March average sequential revenue decline, of approximately 14 percent in the first quarter of 2002 from the fourth quarter of 2001, is expected to result in a loss in the quarter of between 11 and 14 cents per share, on a pro-forma basis in the first quarter of 2002.
Historically, Motorola s April-June and July-September quarter revenue patterns typically result in sequential quarterly sales increases throughout the year with the largest of all four quarters in revenue being the October-December calendar quarter. The company believes, at this time, that this seasonal revenue pattern should be repeated in 2002. It also believes that the typical seasonal revenue growth quarter to quarter, when coupled with its cost streamlining noted above and effective cash management, will result in a profitable 2002, on a pro-forma basis.
Christopher B. Galvin, chairman and chief executive officer, said "The extraordinary boom-severe decline technology cycle we are experiencing, when coupled with the overall softening of the global economy, dictates that the company must continue to improve its overall efficiency and competitiveness in order to return to profitability. We also intend to continue to maintain a strong cash position and balance sheet, with an expectation of a lower average debt level in 2002. Our new management team is committed to these objectives.
Personally, I sincerely regret the impact on the Motorola associates affected by these actions, but these initiatives, when coupled with the energy of all ongoing Motorola associates globally and the focus of our leadership team, will result in a leaner, more flexible and more profitable company in a global environment less predictable than in past eras."
The company will hold a conference call for investors to discuss this press release at 4:14 P.M. central standard time today. The conference call will be broadcast live over the Internet and will be available at http://www.motorola.com/investor. The company expects to announce the full details of its fourth quarter and full year 2001 results in a press release on January 22, 2002, after the close of trading of the New York Stock Exchange.
Business Risks: Statements about the company s sales and earnings outlook, the profitability of the company s different business segments, workforce reductions, charges relating to cost-reduction activities, cost savings generated by cost-reduction actions, capital spending by customers for telecommunications infrastructure equipment in 2002 and the ongoing seasonality of the company s revenues, are forward-looking statements based on current expectations and involve risks and uncertainties. The company wishes to caution the reader that the factors below and those on pages F-29 through F-33 of the appendix to the company s Proxy Statement for the 2001 annual meeting of stockholders and in its other SEC filings could cause the company s actual results to differ materially from those stated in the forward-looking statements. These factors include: (i) the company s ability to effectively carry out the planned cost-reduction actions; (ii) the potential for unanticipated results from cost-reduction activities on productivity; (iii) the impact of the slowdown in the overall economy and the uncertainty of current economic conditions; (iv) the impact of ongoing tax relief, interest rate reduction and liquidity infusion efforts to stimulate the economy; (v) the decline in the telecommunications, semiconductor and broadband industries; (vi) the company s continuing ability to access the capital markets on favorable terms; (vii) demand for the company s products, including products related to new technologies; (viii) the company s ability to continue to increase profitability and market share in its wireless handset business; (ix) the company s success in the emerging 3G market; (x) the demand for vendor financing and the company s ability to provide that financing in order to remain competitive; (xi) unexpected liabilities or expenses, including unfavorable outcomes to any currently pending or future litigation, including any relating to the Iridium project; (xii) the success of alliances and agreements with other companies to develop new products and services; (xiii) difficulties in integrating the operations of newly-acquired businesses and achieving strategic objectives, cost savings and other benefits; (xiv) volatility in the market value of securities held by Motorola; (xv) the impact of foreign currency fluctuations; and (xvi) the impact of changes in governmental policies, laws or regulations.
About Motorola: Motorola, Inc. is a global leader in providing integrated communications and embedded electronic solutions. Sales in 2000 were $37.6 billion. Web Site: http://www.motorola.com/investor
Web site: http://www.motorola.com/investor