Motorola, Inc. on Tuesday reported sales of U.S. $6.2 billion in the second quarter of 2003 and net earnings of $119 million, or $0.05 per share, presented in accordance with generally accepted accounting principles (GAAP). This represents a decrease in sales of 10 percent from $6.9 billion in the year-ago quarter. Motorola reported a net loss in the year-ago quarter of $2.3 billion, or ($1.02) per share.
Excluding special items, Motorola had net earnings in the second quarter of 2003 of $19 million, or $.01 per share, compared with net earnings of $39 million, or $.02 per share, in the year-ago quarter. In the second quarter of 2003, Motorola reported special items resulting in net income of $81 million pre-tax, or $100 million after-tax. In the second quarter of 2002, Motorola reported special items resulting in a net charge of $3.3 billion pre-tax, or $2.4 billion after tax. Details of the special items are presented in a table at the end of this press release.
Mike Zafirovski, president and chief operating officer, said, "While the company’s 10-percent decline in sales versus last year is a disappointment, the fact that earnings per share, excluding special items, was only $0.01 lower is evidence of the progress the company has made in improving its cost structure, in what is still a difficult environment for technology companies. Additionally, our ongoing focus on balance sheet management continues to yield solid results, as we generated approximately $300 million of positive operating cash flow during the quarter. This is the tenth consecutive quarter of positive operating cash flow for the company.
"Competitive pressure in the wireless handset market in China, and to a lesser extent Severe Acute Respiratory Syndrome (SARS), have had a significant negative impact on both the Personal Communications segment and the wireless portion of the Semiconductor Products segment. Actions are being taken to improve our competitive position in this very important market, where Motorola is still the market share leader. These actions include numerous new product introductions and increased investment in research and development and go-to-market activities.
"Elsewhere in the company, the Commercial, Government and Industrial Solutions segment reported an excellent quarter, with solid growth in sales and a near doubling of its operating earnings, excluding special items."
Christopher B. Galvin, Motorola chairman and CEO, said, "Given the ongoing challenging global environment for high technology, we continue to improve our cost competitiveness and cash flow while investing proactively in Motorola’s future growth and profitability via research and development. As noted, Motorola continues to generate positive cash flow – approximately $300 million in the second quarter – and we have improved our net debt to net debt plus equity balance sheet ratio to 12.4 percent from 18.2 percent in the year-ago quarter.
"A robust inclination for global business to invest is unlikely to return until there is some reduction in the number of unsettling issues facing decision makers. Most people can rationalize three or four disturbing geo-political or economic challenges, but when the list grows larger, it tends to make many people freeze into a ‘let’s wait and see’ mode.
"Having provided no guidance for the third quarter of the year until now, we expect sales of between $6.3 and $6.5 billion and earnings per share in the range of break-even to $0.02 on a GAAP basis and $0.02 to $0.04 excluding special items.
"Going forward, we will continue to rely on our tested management objectives as outlined in our five-point plan to enhance shareholder value. We will focus on our balance sheet in executing on our financial goals, extend our strategic relationships with customers and suppliers, and continue to differentiate ourselves from our competition."
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