Motorola, the second-largest mobile phone maker after Finland's Nokia, plans to cut 3,500 jobs, or about 5 per cent of its workforce, as part of an effort to reduce operating costs after what chief executive Ed Zander described as a "challenging" fourth quarter.
The job cuts, which are expected to save the company about $400 million (€309 million) over two years and will be completed by mid-year, were announced during a conference call with analysts by David Devonshire, chief financial officer.
Mr Devonshire also forecast 2007 earnings per share would be flat to slightly above its 2006 earnings of $1.13 per share, on sales of $46-49 billion.
The US-based company, which has 67,000 employees worldwide, issued a profit warning two weeks ago. It alerted investors that fourth-quarter profits would be well below expectations because of a mobile phone price war that broke out during the crucial holiday selling season, affecting average selling prices.
Yesterday, Motorola confirmed that fourth-quarter profit fell 48 per cent as the company slashed prices to compete with Nokia and South Korea's Samsung Electronics. Sales gained 17 per cent to $11.8 billion, in line with expectations.
Mr Zander said a variety of factors, including missed forecasts, had resulted in a disappointing fourth quarter, in spite of strong sales. Nevertheless, he said Motorola would stick with its strategy. "There's no change in strategy," he told analysts. "There may be some changes in tactics."
He also dismissed suggestions that the super-slim Razr phone, which Motorola introduced two years ago, helping revitalise its handset business, was running out of momentum.
Overall, Motorola shipped 65.7 million handsets in the quarter, up 47 per cent from a year earlier, and its share of the global market rose to 23.3 per cent, up almost one percentage point from the third quarter.
However, Ron Garriques, head of mobile devices, acknowledged that steep price discounts for the most expensive 3G phones and for cheaper phones sold in emerging markets had taken its toll.
Fourth-quarter net income dropped to $624 million, or 25 cents a share, from $1.2 billion, or 47 cents, a year earlier. Profit from continuing operations halved to $528 million.
- (Financial Times service)
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