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 last week with the U.S. Securities and Exchange Commission (SEC).
The company earlier had said it expected to reach profitability by the third quarter of 2002. It expects ongoing operations to be profitable for 2002, according to a proxy statement for investors filed to the SEC on March 29. However, 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, who were not shocked by the disclosure.
"I'm not at all surprised the company is making additional one-time charges this year," said Mark Roberts, at Wachovia Securities Inc., in San Francisco. "We had only expected them to be modestly profitable from operations this year," excluding any special charges, he added.
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 the company's goal of 10 by the end of this year, according to John Dryden, an analyst at J.P. Morgan Chase & Co., in San Francisco.
"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, in Schaumburg, Illinois, expects its ongoing 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, according to the filing.