Ahead of the Bell: Apple to post 2Q earnings

Apple Inc., maker of Macintosh computers, iPods and the iPhone, is expected to report a small drop in quarterly earnings after the closing bell Wednesday as the economic downturn and an anticipated replacement for the iPhone compounded a seasonally slow quarter.

Analysts surveyed by Thomson Reuters expect Apple ( AAPL - news - people ) to earn $1.09 per share on $8 billion in sales.

U.S. Mac shipments slipped about 1 percent in the quarter, according to researchers at IDC and Gartner Inc. ( IT - news - people ) Analysts are divided on whether the Cupertino, Calif.-based company sold as many iPods, iPhones and Macs as expected.

Investors will parse Apple executives' comments for evidence that a new iPhone is being readied for June. Rumors point to an announcement at a developer conference.

They'll also be looking for word that Chief Executive Steve Jobs will return from medical leave at the end of June as planned. Jobs, a survivor of pancreatic cancer, in January said his health problems were more complicated than an easily treatable hormone imbalance.

U.S. households, hit by declining home values and stock market losses, have cut back on their debt levels for the first time on record as loans remain scarce amid what appears to be a deepening recession.

The Federal Reserve on Thursday released it latest quarterly look at consumer and business finances showing that households reduced their debt levels by 0.8 percent at an annual rate in the July-September period, the first drop on records that go back more than 50 years.

The decline in household debt levels is evidence of the severe credit squeeze that is occurring as banks, saddled by billions of dollars of losses in mortgage debt, have tightened lending standards and made it harder for people to get loans.

Mortgage debt fell at an annual rate of 2.4 percent in the third quarter, the largest decline on record. Mortgage debt had fallen at an annual rate of 0.1 percent in the second quarter. Those two quarterly declines are the first such drops in the Fed survey that dates back to 1952.

In past periods of tight credit, mortgage and total household debt have never declined, although the debt growth usually slowed.

The Fed report also showed that households' net worth fell by 4.7 percent in the third quarter to $56.5 trillion, reflecting the hit Americans are taking as the value of their homes and investments decline.

The drop in household net worth - total assets such as homes and checking accounts minus liabilities like mortgages and credit-card debt - marked the fourth straight quarterly decline since total family net worth hit an all-time high of $63.6 trillion in the July-September quarter of 2007.

Deutsche Post AG is poised to announce thousands of job cuts at its DHL Express operations in the United States, possibly as early as Monday, a person familiar with the decision told The Associated Press.

The person said on condition of anonymity Sunday that the Bonn-based express mail and logistics company was poised to announce that the cutbacks at its DHL operations in the United States would affect between 12,000 and 13,000 jobs. The person was not authorized to speak to the media.

The cuts are part of a wider plan to curtail operations in the U.S., including ground deliveries, and would likely affect drivers, shipping clerks and warehouse workers. The express unit employs some 18,000 workers.

The expected move will not signal Deutsche Post's exit from the U.S., where it faces strident competition from UPS Inc. and FedEx Corp.

The person told the AP that the company's U.S. logistics unit, which employs some 25,000 people, would not be affected and some staff at DHL would remain.

"We're not exiting the U.S. entirely," the person said.

Deutsche Post itself did not comment Sunday.

Deutsche Post said earlier this year that competition, rising fuel prices and other factors have put its U.S. DHL operations on track to lose 1.3 billion euros ($1.6 billion) by the end of the year.

In May, Deutsche Post's chief executive Frank Appel announced a radical restructuring of the U.S. operations, which have posted recurrent losses. At the time, Appel said the company's U.S. freight flights were to be taken over by rival UPS Inc.

On Friday, the U.S. unions that represent some DHL employees and pilots that currently provide air service for some of DHL's shipments said they had not been informed of any forthcoming changes. But DHL scheduled a conference call with reporters for Monday afternoon to discuss news that was to be announced earlier in the day and answer questions about DHL's U.S. Express business.

DHL spokesman Jonathan Baker declined to provide details Friday on what will be announced Monday. As to the talks with UPS, he said, "We are continuing to talk with UPS. The talks are constructive. We expect to finalize our negotiations by year-end."

A person familiar with UPS' talks with DHL said Friday that if DHL makes significant cuts to its ground operations in the U.S., it wouldn't necessarily affect UPS and DHL reaching a deal since the talks solely involve air delivery of packages, not ground delivery.

The person spoke on condition of anonymity because of the sensitive nature of the talks.

UPS and DHL proposed a collaboration in May in which UPS would carry some air packages for DHL. The deal, if completed, could last up to 10 years and infuse up to $1 billion in annual revenue for UPS.

UPS has said the contract will mostly involve the transport of DHL packages between airports in North America -- not the pickup or delivery of DHL packages to customers. UPS has said the deal is similar to its existing agreement with the U.S. Postal Service.

Thousands of jobs could be lost at an air cargo facility in Wilmington, Ohio, if the agreement between DHL and UPS is consummated.

Deutsche Post slashed its earnings forecasts for both 2008 and 2009 late last month, saying it expects pretax profit to fall 8 percent in the third quarter "as the global economic environment deteriorated markedly."

Deutsche Post is scheduled to release its third-quarter results on Monday, followed by its nine-month figures on Tuesday, according to its Web site.

The source told AP that discussions with UPS on the business were ongoing, but because of the expected job cuts, the talks would find themselves conducted on a new basis. Deutsche Post, in the interim, is expected to move its remaining freight in the U.S. via road and highway transit, while it could close some of its operations in many cities altogether, the source said.

It was unknown how many jobs of contracting companies working with DHL in the U.S. could be affected.

The source said that some U.S. DHL employees would remain working with American companies' shipments to and from Europe and Asia.

Shares of Deutsche Post were up 5.7 percent to close at 9.36 euros ($11.90) on Friday in Frankfurt.

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AP Business Writers George Frey in Frankfurt, Germany, Harry R. Weber in Atlanta and Samantha Bomkamp in New York contributed to this report.

NEW YORK

Motorola Inc. posted a hefty loss in the third quarter Thursday, citing the continued troubles of its cell phone division. Motorola said it will postpone the planned spin-off of the unit, originally planned for the third quarter of next year.

The maker of communications gear lost $397 million, or 18 cents per share, in the July-September period. It had earned $60 million, or 3 cents per share, in the same period a year ago.

Sales fell 15 percent to $7.48 billion.

The loss included 23 cents of charges, mostly for restructuring costs. Without the charges, Motorola would have earned 5 cents a share, reflecting unexpectedly strong results in its non-cell phone operations. Analysts polled by Thomson Reuters had on average expected the company to earn 2 cents per share on revenue of $7.82 billion.

For the fourth quarter, Motorola said it expects to earn 2 cents to 4 cents per share. Analysts polled by Thomson Reuters had expected the company to earn 7 cents per share in the quarter, excluding items.

Shares of Motorola fell 30 cents, or 5.5 percent, to $5.16 in early trading, even as the broader market rallied.

Chief executive Greg Brown said the company was extending its cost cuts across its operations, which should lead to savings of $800 million next year. The company has cut thousands of jobs this year, but it didn't announce any specific new cuts on Thursday.

Motorola sold 25.4 million cell phones in the third quarter, down from the 28.1 million it sold in the second quarter. The company had said it expected a slight decline. With an 8.5 percent market share, it lost the spot as No. 3 cell phone maker worldwide to Sony Ericsson in the quarter, according to research firm IDC. Nokia Corp. and Samsung Electronics Co. are No. 1 and No. 2, respectively.

The cell phone unit lost $840 million, including a $370 million write-down of inventory. Revenue was $3.1 billion.

Sanjay Jha, who was appointed in August to lead the handset division, said the weak economy and stresses in the financial market were main reasons for the postponed spin-off. He said the unit would slim down its product portfolio and become a leaner organization.

Jha said the company had 20 major platforms for cell phones, making development unwieldy yet leaving Motorola with few products in the two categories that have been in demand this year: "smart" phones and very cheap phones.

He is pruning the portfolio to focus on three software systems: Windows Mobile, which Motorola already uses on a few smart phones; P2K, its own system, used on the Razr phone; and Android, a free operating system from Google Inc. Competitor HTC Corp. recently launched the first Android phone. Jha said Motorola will have one by the 2009 holiday season.

Designers at Motorola have been too focused on making "bright shiny objects," Jha said. In the future, he wants them to focus more on making phones easy to use.

The troubles of the cell phone division stem from its inability to produce a follow-up to a phone that was, for a while, the "bright shiny object" everyone had to have: the Razr phone.

Jha also said Motorola will pull back from the cell phone markets of Europe and parts of Asia, though Jha said China will remain a focus for the company, along with the Americas.

Motorola is not alone in seeing a decline in cell phone sales. IDC said Thursday that global handset shipments declined 0.4 percent from the second quarter to the third, even though the quarter normally sees a pre-holiday ramp-up.

Sales at Motorola's healthier units were essentially flat, and they boosted profits.

Home and Networks Mobility, which makes cable-TV set-top boxes, modems and related gear, saw its operating earnings increase 65 percent to $263 million, on $2.4 billion in sales.

Enterprise Mobility, which makes police radios and other communications equipment for organizations, posted operating earnings of $403 million, up 23 percent, on sales of $2 billion