Motorola handset, chip sales in focus
Technology giant first to weigh in with quarterly results
By Janet Haney, CBS.MarketWatch.com
Last Update: 11:44 AM ET Oct 10, 2000 NewsWatch
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SCHAUMBURG, Ill. (CBS.MW) -- Motorola is the first to step up to the earnings plate on Tuesday after quarterly warnings from tech heavyweights recently rattled Wall Street.
Investors will focus on demand for the company's chips and mobile phone handsets.
Motorola has faced down trimmed sales forecasts from Intel (INTC: news, msgs), Apple Computer (AAPL: news, msgs) and Dell (DELL: news, msgs). The news has spooked investors, leaving some wondering what company was going to be next about product demand.
"The odds are that they'll have a positive quarter," commented Doug Johanson, portfolio manager at IMS Capital Management in Portland, Ore. "We're going to be very interested to see what their margins look like, especially on their handsets."
Motorola shares, though, haven't gone unaffected by the sector's gloomy forecasts. The stock has shed 54 percent since its 52-week high, hit in early March and has slipped 11 percent since Intel's warning on Sept. 21.
Johanson doesn't think there is much correlation between Motorola and the earnings preannouncements from Intel, Apple and Dell.
"Motorola's current [stock] price already reflects a lot of those concerns," he added. "We don't think there's a whole lot of downside here."
Forecasts
Some analysts predict the Schaumburg, Ill.-based company will match the consensus earnings per share estimate of 26 cents a share when it reports its results on Oct. 10. A year ago, Motorola (MOT: news, msgs) earned 16 cents a share.
Analyst Marc Cabi at Credit Suisse First Boston anticipates Motorola will report the expected profit of 26 cents a share, along with quarterly revenue of $9.8 billion. U.S. Bancorp Piper Jaffray forecasts that same EPS outlook, coupled with sales of $10.06 billion.
Cabi wrote in a research note that Motorola's handset sales figures could be light as a result of wilting demand in Europe, although he added that gains in the United States and Asia could help offset that. Intel and Dell both cited sluggish European demand that led to their quarterly preannouncements. Likewise, Apple said sales had slowed in all its geographies.
In Motorola's semiconductor sector, Cabi believes any room for upside could be hampered by a slowdown in PowerPC processor shipments to Apple late in the period.
Additionally, the CSFB analyst said Motorola's broadband business should continue to do better than the investment firm's expectations.
"Overall, we believe the company continues to make progress delivering on its objectives," Cabi wrote. "While we see limited upside on the quarter, we believe the company is attractive at current levels." CSFB reiterated its "buy" rating on the stock.
Ahead of the release of the third-quarter results expected after the close of trading, Motorola shares fell $1.19 to $25.81.
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