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Motorola stock takes a dive

The performance of its newly acquired General Instrument cable operations couldn't forestall a steep dive in Motorola's stock, as the company posted abysmal first-quarter results in its cellular handset operation.

The communications equipment manufacturer said that margins on the consumer cellular division fell to just 1.5%, far below the 7% the company had been generating. Because cellular handsets account for 40% of the company's revenues, investors hammered Motorola's stock down 18%, to $122, on Tuesday.

The company said that it expects second-quarter earnings to come in around 67 cents per share, lower than consensus estimates of 70 cents per share. The company's new broadband division did better, with sales increasing 15%, to $678 million, and orders jumping 46%, to $880 million. Operating profits rose 49%, to $91 million, boosting the division's margin from 10% to 14%.

According to division President Ed Breen, the division has now shipped 7.3 million of the first generation of digital set-top converters, and Motorola has supplied systems with 1,100 digital headends, accounting for 50% of cable households.