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Rockwell Posts $482-Million Loss

Meanwhile, $58-Million Verdict Against Firm Upheld


Hit hard by the costs of its ongoing restructuring, electronics giant Rockwell International Corp. said Monday that it lost $482 million in its fiscal 1998 third quarter after taking a $587-million charge stemming from its corporate overhaul.

Separately, Costa Mesa-based Rockwell said a federal appeals court rejected its protest of a $58-million verdict lodged against it last year in a theft-of-technologies case.

Included in the financial statistics released Monday was a $32-million loss for the company's Semiconductor Systems division in Newport Beach, soon to be spun off as a separate publicly traded company.

Rockwell's net loss, equal to $2.47 a share, contrasts with a year-earlier profit of $167 million, or 78 cents a share.

In the last two years, Rockwell has transformed itself from a defense and aerospace contractor to a consumer electronics firm, shedding units with annual sales of about $10 billion in the process.

The company says that it anticipates emerging from its reorganization as a $7-billion-a-year business.


"I am confident the operating efficiencies resulting from these actions, combined with our strong market positions and leading technologies and customer relationships, will allow us to deliver consistent earnings-per-share growth," Chairman and Chief Executive Don Davis said in a statement.

In Rockwell's automation business, which makes equipment used to automate factory production, third-quarter operating earnings fell 9.4% to $144 million from $159 million a year ago.

Results were hurt by problems in its industrial motors division.

The results also include a gain of about $16 million associated with the resolution of an environmental dispute with Exxon Corp. Revenue of $1.1 billion was little changed from a year ago, excluding sales from the Kato Engineering business, which Rockwell sold early in the third quarter.

For the first nine months, Rockwell posted a loss of $301 million, or $1.51 a share, compared with a year-earlier profit of $535 million, or $2.44 a share.

Exclusive of its reorganization charges and the loss from the semiconductor unit, Rockwell posted a profit from ongoing operations of $88 million, or 45 cents a share, down 27% from $120 million, or 56 cents, from the same operations a year ago.

Revenue from continuing operations in the third quarter ended June 30 was nearly $1.7 billion, up slightly from $1.6 billion a year earlier. The company did not report revenue from the semiconductor unit.

Profit from continuing operations for the first nine months was $435 million, down from $439 million, while revenue rose slightly to $4.9 billion from $4.6 billion.


Rockwell shares fell 69 cents Monday, closing at $47 on the New York Stock Exchange.

Its avionics and communications business fared worse. Although Boeing Co. agreed to use Rockwell's avionics software and equipment to upgrade the cockpits of the Army's Chinook helicopters, Rockwell is still getting beat by rival Honeywell Inc.

Operating earnings for Rockwell's avionics and communications business fell 40%, to $42 million from $70 million a year ago. Results there were hurt by an estimated loss of $35 million on a government contract.

In the technology theft case, which involves Rockwell's semiconductor unit, a three-judge appeals panel in Washington sided with Newport Beach-based Celeritas Technologies Ltd. in its 1995 suit claiming that Rockwell stole technology that increases the rate of data transmission over analog networks.

Rockwell, the world's largest maker of chips used in computer modems, now must decide whether to pay the judgment, or ask either the full appeals court or the U.S. Supreme Court to review the case. Company officials said they were disappointed but had not yet decided how to respond to the ruling.

Cellular modems allow computers to connect to the Internet and other online networks without using phone lines. Until recent years, however, transmission quality on cellular modems has been poor.

Celeritas developed a product designed to reduce those problems and in 1993 asked Rockwell if it would license the technology. Rockwell declined, but in 1995 began shipping chip sets using a similar technology.

Celeritas sued, saying Rockwell stole its technology, violated a nondisclosure agreement and infringed its patent. A jury sided with Celeritas on all three charges, and a federal judge in California eventually awarded the company nearly $58 million in damages.

The appeals panel upheld the verdict on the nondisclosure agreement.


Bloomberg News was used in compiling this report.

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