Charges push Motorola into the red


Charges push Motorola into the red

Motorola does not expect to turn a profit in 2002 because of special charges against its financial results, the company disclosed in a statement filed with the US Securities and Exchange Commission (SEC).

The company earlier had said it expected to reach profitability by the third quarter of 2002, according to a statement for investors filed to the SEC on 29 March. But the special charges will result in a loss overall, the company said. It declined to be more specific about the expected impact of the charges.

The charges, primarily costs associated with shutting down plants and reducing its workforce, should help the company in the long run, according to financial analysts.

"I'm not at all surprised the company is making additional one-time charges this year," said Mark Roberts, at Wachovia Securities. "We had only expected them to be modestly profitable from operations this year," adding that any special charges were excluded.

The sharp decline in the IT industry over the past two years has hit Motorola hard, especially in its semiconductor business.

The company is in the process of closing down the majority of its chip plants, which numbered 27 in 2000 and probably will be reduced to 10 by the end of this year, according to John Dryden, an analyst at JP Morgan Chase & Co.

"They're paring down to get in a position where, if the market does recover, they'll be in a light mode," with lower fixed costs, Dryden said.

Motorola expects operations to return to profitability this year as a result of improved efficiency, reduced costs, increased sales of handsets and a recovery in the semiconductor industry.

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