Motorola plans additional 4,000 job cuts

/ Source: The Associated Press

Cell phone maker Motorola Inc. said Wednesday it will cut another 4,000 jobs as part of a plan to improve sagging financial and operational results.

The latest round of cuts means the world’s No. 2 handset maker has announced plans to eliminate more than 10 percent of its work force since the start of 2007, when it became clear that two years of strong momentum behind the popular Razr phone had collapsed.

The company already is in the process of eliminating 3,500 jobs as part of a two-year cost-cutting plan to save $400 million. Those layoffs, announced in January, are to be completed by June 30.

Motorola said it will save another $600 million in 2008 by cutting 4,000 more workers, prioritizing investments and putting controls on discretionary spending and general and administrative expenses.

The Schaumburg-based company did not specify where the new cuts would be made. Spokeswoman Jennifer Weyrauch said they will be achieved through a mixture of attrition and layoffs.

The company expects to take a restructuring charge of $300 million, or 8 cents per share, in 2007, from severance and related expenses from staff cuts.

“Long-term, sustainable profitability is — and always has been — Motorola’s top priority,” Chief Financial Officer Tom Meredith said. “Today’s actions are an update to the commitment we made ... to drive out additional costs, and a continuation of the plan we announced in January.”

Motorola’s work force, which stood at 150,000 people worldwide as recently as 2000, had declined to 66,000 at the beginning of the year. Weyrauch said the company, which has acquired several smaller firms in recent months, also is continuing to hire.

It remains to be seen whether it can come up with a hit successor to the Razr, the success of which has been eroded by declining sale prices and competitors’ new phones.

Wall Street appeared to modestly approve of the latest cuts. Motorola shares rose 12 cents in extended-hours trading after closing the regular session down 2 cents at $18.28.

“From a cost-cutting perspective, these are steps in the right direction for the long term,” said Morningstar analyst John Slack. “But the big issue to underscore is that products in the market are the key, and that is a slow ship to turn.”

Motorola began efforts to cut back in January in an attempt to recover from a series of miscues that caused it to lose about a third of its market value since October.

It had ridden the Razr to significant gains in the world cell phone market for two years, closing the gap on Finland’s Nokia Corp. But its strategy of cutting prices sharply to sell more units backfired, hammering its profit margins. Exacerbating its troubles, Ron Garriques departed abruptly in February as head of the cell phone unit.

This spring, the company posted its first quarterly loss since 2004 and executives indicated its efforts hadn’t gone far enough.

“We are taking steps to ensure that, as these cost reductions are implemented, there will be no adverse impact on customer service and support, product quality and those research and development programs that are expected to contribute meaningfully to Motorola’s revenues, profits and cash flow in 2008 and beyond,” said Greg Brown, president and chief operating officer.

Chief Executive Ed Zander, who was not quoted in the company announcement, was expected to disclose more details Thursday in a presentation to investors in New York.

Motorola already has warned that its results from the April-June quarter will not be good. Analysts are openly skeptical about Zander’s pledge to significantly improve operating results in the second half of this year.

The company’s travails made it the target of a proxy fight this year by billionaire investor Carl Icahn, who lost his bid earlier this month for a board seat.

Motorola said Wednesday that Icahn had received 717.1 million votes compared with 931.7 million for John White, the company nominee he was closest to defeating. All other Motorola nominees got at least 1.6 billion votes.