Motorola Lowers Handset Sales Forecasts

Motorola has said that its sales of cellular handsets in Asia in the second quarter are lower than it had originally expected. This is due to a combination of the impact of the SARS (Severe Acute Respiratory Syndrome) outbreak, which has had a more pronounced impact on consumer purchases of cellular handsets than the company had assumed in its previous guidance, as well as continuing excess levels of inventory from locally based handset manufacturers. Cell phone sales in North America, Latin America and Europe are meeting original expectations for the second quarter.

The Company's Semiconductor Products segment is also being adversely affected by these issues in Asia. Its sales of wireless handset components to PCS and other merchant wireless customers have not met earlier expectations, as these customers adjust their inventories to respond to the decline in Asian sales. Additionally, in late May, Motorola's semiconductor manufacturing facility in Sendai, Japan was damaged by a 7.0 level earthquake temporarily disrupted manufacturing operations and resulting in repair and clean up costs in the second quarter.

In response to the increase in competition from locally based handset manufacturers the company elected not to overbuild its current handset inventory in the distribution channels in Asia. The company has introduced a strong portfolio of new products in the region, with an even greater number of new products expected to become available in the third and fourth quarters of 2003. Additionally, the company has increased its research and development resources in Asia and focused those resources on products for the region. The company is also expanding its channels of distribution in the region.

The company now expects its second quarter sales to be between US$6.0 and US$6.2 billion, versus its prior guidance of US$6.4 to US$6.6 billion.

Sales and earnings per share guidance for the full year of 2003 will be lowered due to the decrease in guidance for the second quarter and because the issues adversely impacting the second quarter are now to some degree, expected to also impact the third and possibly the fourth quarter. The company currently intends to provide a revision to its guidance for the full year of 2003 when it announces its actual financial results for the second quarter in mid July."

Posted to the site on 10th June 2003