Thursday, January 15, 2009

Motorola Shears 4,000 More Jobs as Recession Withers Demand

Jan. 15 (Bloomberg) -- Motorola Inc., the second-biggest U.S. seller of mobile phones, cut an additional 4,000 jobs as consumer demand languishes under the strain of the recession.

The mobile devices unit will account for about 3,000 of the job losses, Schaumburg, Illinois-based Motorola said yesterday in a statement. The reductions, which begin immediately, follow 3,000 cuts disclosed in October as the faltering phone business eroded the company’s profitability.

Since 2007, Motorola has reduced its workforce by about 16,000, joining AT&T Inc., Verizon Communications Inc. and Sprint Nextel Corp. in slashing jobs. Motorola shipped half as many phones in the fourth quarter as a year earlier. The company expects to save about $1.5 billion this year from yesterday’s cuts and those announced last quarter.

“It’s tough to turn something around in a good environment, it’s a lot tougher in a tough environment,” said Mark McKechnie, an analyst at Broadpoint AmTech Inc. in San Francisco, who has a “neutral” rating on the shares. “The turnaround can hopefully start after this round of layoffs.”

Motorola was unchanged in late trading yesterday after dropping 21 cents to $4.11 on the New York Stock Exchange. The shares slid 72 percent last year.

AT&T said last month it would cut 12,000 jobs, or 4 percent of the workforce, as the economy falters. A few days later, Sprint said it would cut jobs throughout its units to bolster profit margins. Verizon is nearing the end of a three-year plan to eliminate 7,000 jobs from its business division.

The slumping economy led analysts at Citigroup Inc. to predict last month that global mobile-phone sales will fall 13 percent this year, the first drop since 2001.

Pension Freeze

Co-Chief Executive Officers Greg Brown and Sanjay Jha have frozen U.S. pension plans and cut executive pay to lower costs. Jha has said he’ll use Google Inc.’s Android software to create more advanced devices to challenge Apple Inc. and Samsung Electronics Co., which took the market lead in the third quarter.

Revenue in the fourth period fell to between $7 billion and $7.2 billion, Motorola said in yesterday’s statement. That missed the average $7.47 billion estimate of 22 analysts in a Bloomberg survey. Sales of $7 billion would represent a 27 percent drop from a year earlier.

The company had a net loss of 7 cents to 8 cents, excluding some items. Analysts had estimated a loss of 1 cent. Full results will be reported on Feb. 3, Motorola said.

Motorola shipped about 19 million handsets in the fourth quarter, less than half the amount of the year-earlier period.

Holiday 2009 Release

The company introduced its first touch-screen device, the Krave, in October to compete with Apple’s iPhone. Later that month, Jha said the company had been too focused on “bright, shiny objects.” Motorola would trim the number of operating systems to three and release an Android-based phone in time for the 2009 holidays, he said.

“If the environment’s still weak in the second half of ‘09, then this could be a ‘10 story,” Broadpoint’s McKechnie said.

Motorola lost its top ranking in the U.S. mobile-phone market in the third quarter as the company’s share of sales slid to 21.1 percent from 32.7 percent a year earlier, according to researcher Strategy Analytics in Newton, Massachusetts. Sales at Samsung, based in Suwon, South Korea, rose to 22.4 percent of the market from 17.9 percent.


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