New York: Motorola Inc. has posted hefty losses in Q3, citing continued troubles of its cell phone division. The company will postpone the planned spin-off of the unit, and cut more jobs.
The maker of communications gear said it would get rid of 3,000 jobs by April, with about 2,000 of them coming from the cell phone unit. The company last announced 2,600 job cuts in April.
Dip in share price
Motorola 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% 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 31 cents, or 5.7%, to $5.15 in afternoon trading, even as the broader market rallied.
Plans to cut costs by $800 mn in 2009
The job cuts are part of efforts to cut costs by $800 million next year, chief executive Greg Brown said. 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% 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.
Cell phone unit sales dip
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.
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% from the second quarter to the third, even though the quarter normally sees a pre-holiday ramp-up.