Tech gloom continues — Motorola, Intel warn of profit fall

With the warning, Intel and Motorola join a host of other marquee technology names such as Gateway Inc, Apple Computer Inc and Dell Computer Corp that have warned of weaker than expected results. "It’s going to be harsh days on Wall Street, although you had to expect something like this. You can’t have Dell, Apple and Motorola and others having trouble and it not affecting Intel in some way," Gary Helmeg, computer analyst for Wit SoundView said.

The warning from Motorola — hit by order slowdowns among auto, network, computer semiconductor customers and its own wireless business — was just the latest in the technology sector and the second time the company cut fourth-quarter estimates. "As a result of recent large cancellations by customers worldwide, the company now expects revenue for the fourth quarter to be flat, plus or minus a couple of percentage points, with third quarter revenue of $8.7 billion," Intel, the Santa Clara, Calif., company, said in a statement issued after the close of market.

That is lower than the previous expectation that fourth-quarter revenue would be up 4 to 8 per cent from third quarter revenue, it said. Intel did not provide an earnings per share forecast in its statement. Analysts had been expecting it to earn 42 cents per share, up from 35 cents per share a year earlier, according to research firm First Call/Thomson Financial.

Motorola said it expected fourth-quarter sales of $ 10 billion and earnings per share of 15 cents, excluding special items, compared with its prior guidance of $10.5 billion in sales and 27 cents a share in earnings. Motorola had already reduced fourth-quarter earnings expectations to 27 cents from the analysts’ previous consensus of 37 cents a share in October. The company had reported 26 cents a share for the quarter last year.

The warning by Motorola contrasts with the upbeat forecast from the No. 1 mobile phone maker, Finland’s Nokia Corp, earlier this week. Nokia has moved aggressively to carve out more market share against its rivals, which include Sweden’s Ericsson.

Intel said its fourth-quarter gross margins remain unchanged at 63 percent, plus or minus a point. Expenses in the fourth quarter are now expected to be about flat with third-quarter expenses of $2.3 billion. This is lower than the previous expectation that fourth-quarter expenses would be up 6 to 8 per cent from third-quarter expenses, due primarily to a slowdown in discretionary spending and lower revenue dependent and profit dependent expenses.

As a result of the increasingly competitive environment, Schaumburg, Ill.-based Motorola has been initiating cost-cutting measures in its mobile phone unit in an effort to maintain profit levels. However, analysts said they were surprised by the news, particularly regarding Motorola’s handset unit. "Surely the handset part of it was a complete surprise," Ed Snyder, analyst with Chase H&Q said. "They hinted at the semiconductor stuff last quarter when they said things were going to be flat."

Apple Computer Inc warned on Tuesday that it would post its first quarterly operating loss in three years as sales fell far short of expectations, becoming the second major personal computer maker to warn that holiday sales were slow.

Chief Executive Steve Jobs, announcing the first loss since he returned in 1997 to the company he founded, said a worldwide economic slowdown, bad times for personal computer makers and problems of its own making had blindsided Apple. "I’m not proud of this," Jobs told a conference call in which he lowered forecasts for the second quarter in a row. "We were simply not prepared to be hit with three problems simultaneously."