Motorola curbs sales estimates as SARS impact lingers

Motorola scaled back its second-quarter and full-year 2003 revenue expectations Monday, saying the outbreak of SARS (Severe Acute Respiratory Syndrome) in Asia is having a greater impact on handset sales than anticipated. The company also said it is being affected by local handset makers' excess inventory levels.

Separately, industry leader Nokia warned Tuesday that second-quarter sales growth for its own mobile phone business could fall below its earlier guidance, in part due to SARS but also because of continued economic weakness in Europe and the U.S.

Motorola said it now expects to bring in between US$6 billion and $6.2 billion in sales for the second quarter, versus its prior estimate of $6.4 billion to $6.6 billion. Earnings per share are expected to be $0.02, compared to its prior estimate of between $0.01 and $0.03.

Motorola's curbed sales prediction weighed Asian stocks down Tuesday. The company said that its European, North America and Latin America Personal Communications Segments remain on track, however.

The SARS virus has been cited as the cause for a slew of technology company woes in Asia, where fear of its spread led to temporary factory closures, widespread quarantines and cancelled meetings and trade shows.

Although Motorola did not detail how the epidemic impacted handset sales, it did say it was confident that local authorities would bring SARS under control, and that consumer behavior patterns in the region would return to normal.

The company also cited excessive handset inventory levels as a cause for its reduced forecast, saying it has decided not to "overbuild" its current handset inventory due to increased competition from local handset manufacturers.

What's more, Motorola expects SARS and inventory troubles to linger throughout the third and fourth quarters, leading it to revise its full-year 2003 prospects. The company said it will release new full-year estimates upon release of its second-quarter results in mid-July.

Motorola also cited concerns over its Asian semiconductor operations, saying that its manufacturing facility in Sendai, Japan, was damaged by a 7.0 earthquake in late May and manufacturing was temporarily disrupted.

Shares of Motorola (MOT) closed down 2.36 percent on the New York Stock Exchange Monday, to $8.68 a share, following release of the news.

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