RESPONDING TO A brutal day on Wall Street and a published report questioning the company's cash position, Motorola on Friday issued a wordy statement denying that it was facing a liquidity problem. The vendor is set to announce its first-quarter financial results on Tuesday.

With sales of its phone handsets dwindling, demand for its semiconductors slumping, and a slowing U.S. economy wearing on the company, some bond analysts are worried that Motorola may not have the financial strength to obtain short-term debt financing, according to a Bloomberg report.

"Motorola today is financially sound," Bob Growney, Motorola president and chief operating officer, said in a statement refuting the analysts' comments in the Bloomberg report. "Any suggestion or erroneous report that Motorola faces a serious liquidity problem is simply not correct and is not supported by fact." The Motorola statement was released toward the close of regular Friday market trading.

The company's attempt to calm investors didn't work. In line with a broader market loss Friday, Motorola's (MOT) shares fell below its 52-week low, ending the regular trading at S$11.50, a drop of 23.08 percent or $3.45.

"People are concerned they're caught in a squeeze," said Samuel May, a senior research analyst with U.S. Bancorp Piper Jaffray. "Now are they? I don't know."

Motorola strongly denied any so-called squeeze. As of Friday, the company said it had more than $4.5 billion in cash and cash equivalents and outstanding commercial paper had been reduced to $3.1 billion. Those figures compare with its financial position at the end of the first quarter of this year -- March 30, 2001 -- when Motorola said it had cash and cash equivalents of $4.4 billion and $4.1 billion of outstanding commercial paper.

Still, investors have punished Motorola continually on fears that the company isn't sufficiently prepared to wait out a slowdown in sales. To boost its ability to borrow, Motorola must reduce capital spending, sell off some of its business units or bring in more revenue, according to May.

"Investors have reason to be cautious about any large cap equipment company that is seeing its business deteriorate," he said.

According to its March proxy statement, Motorola noted that it "expects accounts receivable to decline during 2001." With revenue continuing to diminish, the company has actively pursued the other options to add to its cash position.

Since December, Motorola has laid off more than 22,000 employees, reducing its capital expenditures significantly.

Motorola has also sold off a number of its business units. The company said it has received more than $1 billion from the sale of several of its interests in cellular operating companies worldwide and expects to receive about $1.8 billion for the sale of its interests in cellular operating companies in northern Mexico by the third quarter of this year.

Looking ahead to Tuesday, 26 analysts polled by First Call/Thomson Financial are expecting Schaumburg, Ill.-based Motorola to report a first-quarter loss of $0.07. The company reported a $0.20 profit in the year-ago quarter.

InfoWorld

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