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April 9, 1997updated 05 Sep 2016 12:52pm

MOTOROLA WARNS OF MORE COST-CUTTING MEASURES LATER THIS YEAR

By CBR Staff Writer

Reviewing its figures, which did not leave the market over- impressed (CI No 3,135), Motorola Inc has no great hopes of a renewed chip boom: it says it expects the worldwide semiconductor industry to grow by about 10% in 1997 versus 1996, and describes the recovery in the industry and its own chip business as very gradual. Handling the conference call with analysts, Ed Gams, head of Motorola investor relations, said the over-capacity in the semiconductor industry persists, and the company expects continued pricing pressures. Motorola, with a mere 4.9% margin in 1996, does not expect a return to double-digit operating margins for its semiconductor business this year – and the overall operating margin declined in the first quarter versus first quarter last year, although it did not have the figures. The company, which a couple of years ago was growing at the same sort of storming rate as Hewlett-Packard Co, actually saw a marginal fall in sales in the quarter, recording a total of $6.64bn, down 4.5%, and said the decline was largely attributable to the semiconductor business. Motorola has emerged from the world chip recession, but says recovery will be modest in 1997; its own equipment businesses continue to absorb some 20% of its total semiconductor output. The company says it will continue to take steps to restore the growth in profits and revenues, but that these measures may result in charges against earnings later in 1997. Measures include implementing cost reductions in businesses that are not achieving adequate profitability, reviewing development programs that have not lived up to their promise, and concentrating resources on technologies and geographic regions where the company can establish or continue leadership, it said. The company says the global economic outlook continues promising, especially in emerging markets in Latin America and Asia. Demand for our communications products and systems is strong in these markets. We see great opportunity for improved business in the developed world as well, it said. Motorola said sales in its cellular products segment, recently hit by pricing pressure and stiff competition from the Europeans that dominate the business worldwide, increased by 4% and new orders increased by 3%. But sales in the messaging information and media segment, which includes the paging group, fell 7% orders were up just 1% and operating profits were lower. The Motorola Computer Group still manages to under-achieve woefully, and group sales declined 7% while orders crashed 19% so that the group recorded a larger operating loss than the year-earlier period. Motorola shares fell 62.5 cents in early trading from the $61.125 reached in after- hours trade.

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