Motorola May Post First-Quarter Loss, Takes Down Handset Sales Projection

Updated from 8:29 a.m. ET

Motorola (MOT) issued a brief statement Friday morning with a simple, clear warning: It would miss its previous top- and bottom-line projections for the first quarter, and possibly incur an operating loss.

Shares of the company fell 70 cents, or 4%, $16.59 Friday morning.

Citing the "sharp economic slowdown" in the U.S. as well as "inventory corrections taking place broadly in technology markets worldwide," the electronic equipment and component maker said it doesn't expect to hit its first-quarter revenue estimate of $8.8 billion and first-quarter earnings estimate of 12 cents a share, given on Jan. 11. The estimates were in line with consensus figures tabulated by First Call/Thomson Financial.

Motorola warned in December that it would fall short of earnings and sales projections in the first half of 2001, blaming cost issues in its cellular handset business and falling demand in its semiconductor business -- its two largest segments in terms of revenue. Low expectations and poor visibility have also plagued the second largest maker of handsets, which is based in Schaumburg, Ill.

The company said Friday it "continues to actively adjust its cost structure in response to this environment and will take additional cost reduction steps in the future."

On its conference call Friday, Motorola lowered its closely watched projection for worldwide handset sales this year to 500 million. It had been expecting sales at the low end of a 525 million to 575 million range. Market leader Nokia (NOK) last month shrank its forecast to a range of 500 million to 550 million units, from 550 million. And at least one analyst is talking about a range of 490 million to 510 million.

All this talk already has been hitting cell-phone makers' stocks. Nokia was hit by those concerns on Thursday as investors fretted over a possible profit warning. Nokia said Thursday it doesn't talk about rumors. But Friday morning, Goldman Sachs downgraded Nokia to market outperformer and knocked it off its recommended list. Goldman said it believes the general industry model is changing fundamentally and that market visibility in the short term looked worse than expected for telecommunication equipment firms.

Friday morning it was down $1.70, or 7.3%, to $21.55. No. 3 handset maker Ericsson (ERICY) was off 38 cents, or 4.6%, to $7.75.

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