With sales of over $6,000m for the first quarter, up a phenomenal 28%, Motorola Inc is well on the way to $25,000m for the year. Star performer was the General Systems Sector, which covers telephony equipment: sales increased 41% to $2,300m, orders rose 37% and operating profits were up. Worldwide sales and orders for cellular telephones increased compared with a year ago but the growth was at a lower rate than the average of the past several years – but the company reports good progress in running down the excess inventory that was a feature of the year-end report and caused the share price to quail. It looks for US inventories to return to more acceptable levels during the current quarter. In the Semiconductor Segment, sales increased 16% to $1,900m, marking the 25th consecutive quarter of sales growth. Orders climbed 24% and operating profits were higher, and Europe and the Asia-Pacific showed the biggest growth. Among market segments, automotive, industrial and communications showed the greatest strength. Highest order growth among products included RISC microprocessors, fast static random access memories and signal processors. Expansion plans include increased production capacity at Guadalajara, Mexico, and a production facility in Tianjin, China. In the Messaging, Information and Media Products Segment sales rose 24% to $788m, orders increased 31% and operating profits were higher. The Land Mobile Products Sector was dull, with sales up 5% to $785m, orders up 17%, but operating profits lower. The company blames the need by Nextel Communications Inc and other customers to conclude merger, business planning and financing activities. In the Automotive, Energy and Controls Group, sales rose 37%, orders were 33% higher, and operating profits were higher. And in the Government and Space Technology Group, sales increased 106% as a result of increased sales by the Satellite Communications Division to Iridium Inc. Orders were 8% higher, and the operating loss was lower than a year ago.
Price leader
Manufacturing and other costs of sales increased to 65% of sales in the first quarter from 62% in the year earlier period as a result of start-up costs and inefficiencies associated with the process of adding major elements of new semiconductor manufacturing capacity to support growth in sales and orders, and also the continuation of the company’s strategy to remain the price leader in the cellular telephone industry worldwide. But it managed to reduce its selling, general and administrative expenses to 18% of sales from 21% a year ago. For the rest of the year, Motorola says overall world economic growth remains strong, but warns that in the US, the full impact of higher interest rates remains to be felt. It is finding opportunities in Asia increasingly exciting, as countries such as India expand their telecommunications systems, and emphasise mobile forms of communication as a quicker and more cost-effective means of adding capacity to antiquated terrestrial telecommunications networks. The company finds that Europe is recovering at an increasing rate, and says that despite current economic conditions in Mexico, Latin America remains a huge potential market for its products. Overall, the company says that it finds that the intermediate and long-term outlook remains bright.
