During a conference call with analysts this morning, Motorola officials said the company expects its semiconductor sales to drop again in the second quarter from $1.48 billion in Q1. Motorola's first-quarter chip sales were 22% lower than $1.90 billion chip revenues in Q4 of 2000.

Managers said they expect the company's Semiconductor Products Sector to suffer a larger operating loss in Q2 than its reported loss of $131 million in the first quarter.

On Tuesday evening, Motorola posted a corporate-wide net loss of $533 million on net sales of $7.75 billion in the first quarter (see April 10 story). The net loss included charges in the quarter, and excluding those items, Motorola said its loss would have been $206 million, or -$0.09 per share. During today's conference call, Motorola officials said they anticipated that the company's Q2 loss could be a few cents higher than the -$0.09 loss per share in Q1.

Analysts focused much of their attention during today's conference call on Motorola's wireless systems businesses, which are struggling along with the company's chip sector. Mike Zafirovski, executive vice president and president of Motorola's Personal Communications Sector, said the company now is forecasting total industry shipments of cellular phones in the range of 425-to-475 million units in 2001, which would be flat-to-10% higher than 2000.

At one point last year, some cell-phone makers were forecasting about 100 million units higher than Motorola's new estimate for 2001. The miscalculation in cell-phone demand has played a major role in the current semiconductor downturn.

To fight the downturn and operating losses, Motorola's semiconductor business, based in Austin, Tex., is eliminating 4,000 jobs, and cutting expenses. Most of the job cuts have been implemented, said Fred Shlapak, president of Motorola's Semiconductor Products Sector. He also estimated that the job cuts, reductions in spending, and other actions have trimmed $1 billion in expenses from the semiconductor group, on an annual run-rate basis.

Motorola has cut semiconductor capital spending to $750 million in 2001 from $2.4 billion in 2000, said Shlapak during today's conference call. Most of this year's capital spending will be used to increase capacity for Motorola's 0.13-micron process, called HiPerMOS7, and incremental improvements in other manufacturing areas, he told analysts.

"The semiconductor industry has experienced its sharpest downturn in history as a result of high component inventories for most customers and lower consumer demand," Shlapak said. "From the peak of nearly 50% growth in the second quarter of last year, we have seen a rapid and steep decline to a negative 5% pace in the first quarter of this year."

Motorola did not issue an estimate on how much its semiconductor sales would decline in Q2 from the first quarter's $1.48 billion. However, in issuing its results on Tuesday, Motorola reported that its chip orders were down 49% in the first quarter from bookings a year ago.

"Continuing volatility in the chip market makes forecasting difficult, with third-party projections changing every week," Shlapak said. "We currently believe the total industry sales for this year could be as much as 10-to-15% lower than last year. The only market segment we now expect to grow is automotive, at about 4% industry wide.

"Fortunately, we still expect the industry recovery to begin in the second half of this year as customers work off component inventories and adjust to end market demand," he said, adding that the health of the U.S. economy will continue to be a major factor in semiconductor sales growth later this year and in 2002.

Currently, Motorola's market models show semiconductor sales repeating the last recovery pattern seen in 1998. Shlapak said this would indicate that chip sales would remain somewhat stagnant in late summer and early fall, but then begin a strong increase in late fall and early winter.

"On this basis, we could see industry growth next year in a 15-to-20% range," he told analysts.