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Motorola Denies Money Woes

Telecom: Company says it is financially sound, disputing a published report. Shares hit eight-year low.

April 07, 2001|From Reuters

CHICAGO — Motorola Inc., the world's second-largest mobile phone maker, on Friday denied a published report that it is facing serious liquidity problems after the company's shares fell to their lowest level in eight years.

"Motorola today is financially sound. Any suggestion or erroneous report that Motorola faces a serious liquidity problem is simply not correct and is not supported by fact," said Bob Growney, Motorola's president and chief operating officer.

It was the second time in a week that a major telecommunications equipment firm reassured investors about its financial state. On Wednesday, Lucent Technologies Inc. was forced to issue a statement denying bankruptcy rumors after its shares fell to an all-time low.

Motorola shares fell $3.45, or 23%, to close at $11.50 on the New York Stock Exchange on turnover of 39.4 million shares. Earlier in Friday's session, the shares fell to $10.50, their lowest level since April 1993.

Analysts said investors had feared that Motorola might follow in the footsteps of Lucent, which had reported a negative cash flow due to operational missteps.

Schaumburg, Ill.-based Motorola is under credit watch by Standard & Poor's, considered a precursor to a rating downgrade.

The fears were fueled Friday when a report in a bond newsletter said the company might face a serious liquidity problem due to $6.4 billion in outstanding commercial paper.

The report said Motorola could run into trouble if repeat borrowings in the commercial paper market dry up. Motorola then might not be able to repay the short-term debt.

Motorola disputed the amount of outstanding commercial paper, saying it had cash and cash equivalents of $4.4 billion and $4.1 billion in outstanding commercial paper at the end of the first quarter.

Through Friday, Motorola said it had more than $4.5 billion in cash and cash equivalents. Outstanding commercial paper had been reduced to $3.1 billion, helped by the sale of assets and a term loan.

"Our entire management team is highly focused on maintaining a strong balance sheet and improving cash flow. We also have actions well underway to improve our management of working capital," Growney said.

Motorola, which has been taking aggressive cost-cutting measures, said it expects a significant increase in proceeds from the sale of investments and businesses during 2001, compared with 2000.

Motorola is expected to announce its complete first-quarter financial results Tuesday. Investors will use the report to assess the health of the struggling technology sector and search for clues that the month of March held the seeds of a turnaround.

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