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Motorola to cut 4,000 more jobs in 2009

Mobile handset maker Motorola Inc said it will cut 4,000 more jobs in 2009, in addition to 3,000 it announced last year.

business Updated: Jan 15, 2009 08:55 IST

Mobile handset maker Motorola Inc said on Wednesday it will cut 4,000 more jobs in 2009, in addition to 3,000 it announced last year.

The company said the move will save about $700 million a year starting in 2009, and total $1.5 billion in annual savings when combined with the previous cut.

Most of the new layoffs will hit the mobile devices business, while about 1,000 jobs are tied to corporate functions and other business units.

The move is the latest in cost-cutting measures by Motorola, which has been struggling to revive its business in recent years. In December, it announced it was freezing its pension plans and reducing executive pay.

The Schaumburg, Illinois-based company also said on Wednesday it expects revenue for the fourth quarter to be between $7 billion and $7.2 billion, as it saw continued weakness in consumer demand and customer inventory reductions.

Analysts polled by Thomson Reuters expected, on average, $7.5 billion in revenue.

Shipments in the quarter hit around 19 million units, Motorola said. That's down 25 per cent from the third quarter, a rare and steep decline for the holiday season, and off a whopping 54 per cent from a year ago.

"It's not supposed to happen that way," said analyst Pablo Perez-Fernandez with Global Crown Capital, noting the first quarter is usually weaker than the fourth. "We think that things get worse for Motorola before they start getting better."

The company also said it expects a fourth-quarter net loss from continuing operations between 7 cents and 8 cents per share, including 6 cents per share of restructuring costs and other charges. The estimate did not include new charges for the layoffs announced on Wednesday, which could widen the loss.

Analysts were looking for a profit of 3 cents per share. "The actions we are taking today in our mobile devices business will allow us to further reduce our cost structure, and positions us for improved financial performance in 2009," said Motorola's co-chief executive, Sanjay Jha, in a statement.

Motorola shares fell 21 cents, or 4.9 per cent, to close at $4.11 Wednesday, and were unchanged in after-hours trading following the announcement.

Douglas Ireland, an equity research associate at JMP Securities, said the company has failed to duplicate the success of the Razr phone, which came out in 2005, and is having continuing difficulties organizing a comeback.

The latest in its series of products, an iPhone look-alike with a touch-sensitive screen, the MotoSurf A3100, was unveiled at the International Consumer Electronics Show in Las Vegas earlier this month, but it has yet to secure a carrier. The company said it is expected to start selling in Asia and Latin America by March. In October, the company announced it would cut 3,000 jobs by April, most of them from the cell phone unit, and said it would focus on just three software systems: Microsoft Corp.'s Windows Mobile; P2K, its own system used on the Razr phone; and Android, a free operating system from Google Inc.

Jha said Motorola will have an Android phone by the 2009 holiday season.

"Their new strategy for Android-based phones may be a winner but it is at least two or three quarters from bearing fruit, which is an eternity on Wall Street," Ireland said.

Analyst Edward Snyder, the principal of Charter Equity Research, said Motorola has fallen far since 2006 when it was the No. 2 handset maker behind Nokia Corp; it's now fighting for fifth place with Sony Ericsson.

He said the company was in a "handset death spiral" where it must churn out new models, even unprofitable ones, to maintain its relationship with mobile phone carriers.

"There's been no handset company that's ever turned it around," Snyder said. "They're down 28 or 30 points in the fourth quarter of the Super Bowl. They can still pull it out, but it's going to be a vastly smaller business than where it started."

First Published: Jan 15, 2009 08:54 IST