Motorola Expected to Announce First Loss in 15 Years
DAVID HAFFENREFFER, CNN ANCHOR: It'll be after the closing bell today that investors get their peek at the Motorola quarterly earnings. And here to talk to us about not only Motorola, but also the tech sector in general is Norman Fuchs, senior technology research analyst at M.H. Meyerson. Welcome to the program.</s>NORMAN FUCHS, SENIOR TECHNOLOGY RESEARCH ANALYST, M.H. MEYERSON: Thank you. Nice to be here.</s>HAFFENREFFER: Everybody's waiting for Motorola, apparently. This is their first real glimpse into the tech sector.</s>FUCHS: Motorola, I believe, will not disappoint this afternoon and come in with their -- with a loss of about 10 cents for the quarter -- and I think revenues probably in the $7.5 billion to $7.8 billion for the quarter, which was significantly low of what analysts had expected.</s>HAFFENREFFER: First loss for Motorola, then, in 15 years.</s>FUCHS: A long time.</s>HAFFENREFFER: Is this a big moment for the technology group as a whole or just for Motorola?</s>FUCHS: Well, the market itself has been expecting the downturn. And, obviously, Motorola stock has behaved and performed as though the market was expecting a downturn in the -- in Motorola's -- in Motorola's future. The tech sector, as a whole, has got a real rough ride ahead of it in the rest of 2001. Inventories, the economic environment itself has not been very nice to the tech sector, as, obviously, we've seen across the board.</s>HAFFENREFFER: As you look at this Motorola chart here of the -- that's a five-year chart of the company. As you can see, it's rather dramatic. People might think that they're looking at quite a buying opportunity at this point. At $11.50 per share, do you think this company is worthy of some nibbling?</s>FUCHS: On a -- on the basis of a technical rebound, that might be something that one might look at. But, again, one has to look at Motorola carrying a significant debt portion. Cash flows are slowing. Revenues are coming in. Earnings are coming in. And you still have the debt service to maintain. So, again, it might be interesting on a technical rally. There may be some bump in the movement of the stock. But for this time, I'd be sitting back and not be too actively looking at buying into any of the communications companies right now.</s>HAFFENREFFER: Yes. If you were telling me and describing Motorola to me, telling me that, OK, not only do they make the cell phones, but they also make the chips that go into their own cell phones, as well as sell them out in the mass market, as well, to other companies, I'd say: Hey, that sounds like a pretty good idea. But is that something that has wound up hurting them in this current climate?</s>FUCHS: I don't think it hurts, because many companies do produce products for their own product lines, as well as outsource third party -- for third parties. And Motorola has been doing that for -- you know, their semiconductor business has been doing that for a long, long time -- forever, basically. I don't think it's going to do anything in terms of hurting the company, other than the fact that they have a significant slowdown and that the chip sets and all of the semiconductor components are actually in a decline right now for the rest of this year.</s>HAFFENREFFER: Is -- when it comes to the cell phone business, are they better or worse situated than their major competitors, Nokia and Ericsson?</s>FUCHS: Well, they've lost significant market share to Nokia over the years. Ericsson, as we know, has basically gotten out of the handset business and is competing aggressively for the infrastructure- based station business, which is another area Motorola competes in. And I think Ericsson has a very good position in the bay station market. And, obviously, Nokia continues to erode Motorola's market share, both here and in Europe in terms of handsets. They basically have a declining share base in Asia. So right now, I see that Motorola is deeply behind the curve in the PCS side of the market and is kind of losing share in the bay station infrastructure market as well.</s>HAFFENREFFER: If you have got some money on the sidelines, and you're interested in possibly committing it to this beaten-up market place, are there areas within technology that you see as more attractive than Motorola and this group?</s>FUCHS: Well, right now, I've looked at companies that I would hold for the long term. I would still stick with players like IBM. I would stick with Microsoft. And if you want a technology play that is an outsource play, Flextronics I believe has a good potential because of their ability to have the value in size and ability to generate revenues from all sectors and as an outsource manufacturer, which is where I believe Ericsson sent all their work.</s>HAFFENREFFER: And when you say long term, you mean what?</s>FUCHS: More than 90 days.</s>HAFFENREFFER: All right, Norman, thank you very much. Good to see you -- Norman Fuchs from M.H. Meyerson.