Blaming weakened Asian currencies, Motorola Inc. warned investors that its first-quarter earnings will be well below expectations.
The largest shortfall will come from the company’s semiconductor business, where the Consumer Systems Group and Components Group have been significantly impacted by lack of demand in Asia and increased price pressure in most other regional semiconductor markets, said Motorola. The company expects its paging, handset and cellular infrastructure businesses to reflect slower performances as well.
“Motorola is experiencing deflationary currency-influenced price competition coupled with traditional industry price competitiveness and certain semiconductor industry segment slowdowns that produced weaker-than-expected January and February results,” said Motorola.
Motorola said the analog handset market has slowed faster than expected in the first quarter, but said it is experiencing a positive momentum in the sales of its digital handset products due to its improving position in the Global System for Mobile communications market and its recent introductions of new products into the Code Division Multiple Access and Time Division Multiple Access markets.
“There’s no data to indicate we’re losing market share in the first quarter,” said a Motorola executive. “The overall analog market has slowed more rapidly than we expected in the first quarter … Motorola did not participate in the TDMA, CDMA and PDC phone markets [last year]. That adversely affected our worldwide market share. We’re shipping products in all three of these technologies and will establish a market position in 1998.”
Though demand for its infrastructure remains solid throughout most of the world, Motorola said its Cellular Infrastructure Group is experiencing a significant slowdown of business in Asian countries most affected by the currency crisis. Largely, the Philippines and South Korea aren’t producing any recurring business for the sector, said Motorola.
“Despite recent improvements in order patterns for the company’s paging business in China, order levels in Asia were lower than normal seasonal levels prior to the advent of the Chinese New Year,” said Motorola. “This has affected first-quarter shipment potential.”
Motorola’s fourth-quarter 1997 sales and earnings were slightly below analysts’ expectations. Motorola had said in January that it hoped the efforts of the International Monetary Fund and others might help stabilize the financial problems in Asia.
