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Motorola to cut 4,000 more jobs, sees weak sales

Motorola to cut 4,000 more jobs, sees weak sales
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First Published: Thu, Jan 15 2009. 10 21 AM IST
Updated: Thu, Jan 15 2009. 10 21 AM IST
New York: Motorola Inc will slash another 4,000 jobs, or an estimated 6% of its workforce, and warned that it would have a fourth-quarter loss as sales of mobile phones were weaker than expected.
Analysts had been expecting a new round of job cuts at Motorola, after 6,700 employee departures in 2008, as the economic downturn and a slump in demand for mobile phones add more pressure on a company that had already been losing market share to rivals like Nokia.
Motorola said on Wednesday that the latest move brings its cost cuts to $1.5 billion for 2009 - $700 million in new savings on top of a previously announced plan for $800 million in expense cuts.
It estimated its fourth-quarter net loss per share at 7 cents to 8 cents, including unusual charges of 6 cents a share, but warned that the loss could be even wider as it is still working out items such as impairment testing and income taxes.
The Schaumburg, Illinois-based company said its fourth-quarter revenue would range from $7 billion to $7.2 billion, compared with the average analyst forecast for revenue of $7.5 billion, according to Reuters Estimates.
Motorola’s shares fell a penny to $4.10 after closing 21 cents lower, or almost 5% at $4.11 in regular trade on the New York Stock Exchange.
Spiraling losses
Motorola said it sold about 19 million handsets in the fourth quarter of 2008. That fell short of several analysts’ estimates of 22 million and above.
Motorola, which had already dropped to fourth place in the global handset market in the third quarter with sales of 25.4 million, had sold 40.9 million in the fourth quarter of 2007.
It cited weakness in consumer demand as well as customer inventory reductions for its poor handset sales,
While this is in step with a warning from its strongest competitor, Nokia, that industry cell-phone sales were set to shrink by 5% or more in 2009, analysts said Motorola’s problems were much worse than its rivals’.
Avian Securities analyst Matthew Thornton said broad weakness in demand was compounded by Motorola’s weak products.
Another analyst, Ed Snyder of Charter Equity Research, said that while the cuts were necessary, they may also hurt the company’s efforts to create popular new cell phones.
Motorola said the 4,000 new job cuts include about 3,000 positions in the mobile-devices business and about 1,000 jobs from corporate functions and other business units.
It said that layoffs announced on Wednesday and in October would reduce its mobile-phone unit’s workforce by 25%, or 5,000 employees. In October, it announced 3,000 layoffs, with about two-thirds from the handset unit.
Co-Chief Executive Sanjay Jha said in a statement that $1.2 billion of the $1.5 billion savings plan would apply to mobile devices. Motorola ended 2008 with $7.4 billion cash, he said.
Motorola said it could not give its total workforce number until it finishes preparing its annual report for 2008.
It said that after ending 2007 with 66,000 employees, 4,800 had left by September before it announced 3,000 layoffs. It said that 1,900 of the 3,000 layoffs were planned for the fourth quarter. Excluding any additional hires, that would leave it with a 59,300-employee base at the end of 2008.
The company had announced a charge for severance charges of 2,600 in the first quarter last year. It did not say now many of the 4,800 employees who had left in the first nine months of last year were layoffs or voluntary departures.
The company said that besides mobile devices its other two units were performing well in the challenging environment. Its Enterprise Mobility unit sells equipment to businesses and its Home and Networks Mobility unit sells television set-top boxes and network gear to service providers.
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First Published: Thu, Jan 15 2009. 10 21 AM IST
More Topics: Motorola | Jobs | Mobiles | Recession | US |