ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, January 11, 1996 TAG: 9601110098
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: CHICAGO
SOURCE: Associated Press
A day after Motorola Inc. reported disappointing fourth-quarter earnings, the technology company said Wednesday its cellular phone and semiconductor businesses are likely to struggle through the first half of 1996.
Analysts responded by downgrading their investment ratings for Motorola to ``hold'' or ``neutral'' from ``buy'' amid increasing concern about the health of technology-sector companies.
Some bargain-hunting investors shrugged off the pessimism, however. Motorola stock rose $4.25 to $49.871/2 Wednesday after falling 19 percent the day before.
Wednesday's gains came despite a steep market sell-off, but analysts said they probably won't be sustained. Motorola's profits and those of other cellular businesses are suffering as they court U.S. consumers by lowering prices, the analysts said.
Cowen & Co.'s Albert Lin said Motorola is a double disappointment. When one combines the weak fourth quarter - when Motorola usually does well - with further problems in the first quarter - when it often does not - that paints a very gloomy picture, he said.
Ed Gamms, Motorola vice president of investor relations, said the price competition is likely to continue, offsetting strong gains in the company's cellular business in Asia and South America.
``Since the U.S. had been our largest market for cellular subscribers prior to 1995, as the market slowed considerably, so too have sales slowed,'' Gamms said.
Motorola dominates the cellular phone business with about 42 percent of the world market, but has been hurt by its aging line of cellular phones and the switch from a business-driven market to a consumer one, said Morgan Stanley analyst Robert Maire.
``We're in a market that is shifting from business users who are not particularly price-sensitive to consumers who are very price-sensitive,'' said Maire.
Motorola's fourth-quarter statement showed earnings of $432 million, or 72 cents a share, down from $515 million, or 86 cents, in 1994.
Adding to the gloom, the company told analysts in a teleconference Wednesday that it also expects weaker results from its semiconductor chip business, in part because of the costs of building multimillion-dollar plants, including one near Richmond, to meet the burgeoning market.
Analysts said the chip business also will be hurt by the weaker U.S. cellular business. Motorola uses 18 percent of its chip production in its own products, Maire said.
LENGTH: Medium: 55 linesby CNB