Motorola cuts 4000 more jobs to regain lost profits

Motorola Inc. announced on Wednesday that it would cut an additional 4,000 jobs, or 6 percent of its workforce, as it seeks to return to profitability.

Motorola declared that by cutting 4000 jobs, the company will end up saving $600 million by 2008. It will also have to rank its investments, cut wasteful expenditures and control general and administrative expenses. The Schaumburg, Ill., company, which shrank to 66,000 employees worldwide in 2006 from more than 150,000 in 2000, did not say when the latest cuts would occur.

Due to the declining yearly profits, the company made a two-year cost-cutting plan in January to improve the sagging financial and operational results under which it targeted to remove around 3500 workers, mainly middle managers. This action will save the company around $400 million after the process is completed by 30 June.

No doubt the Motorazr range of cell phones was a huge hit among the masses but the second biggest communications giant has lost one third of its market value to rivals due to tough price competition. Due to its weak phone ranges, the company’s profits fell 48% to $624 million in its fourth quarter, as announced in January.

The tumbling profits of the fourth quarter of 2006, 15 cents per share (41% lower than the previous year), was blamed on the poor performance in its semiconductor and personal communications divisions by the company. It recorded sales of $42,879 million and a net income of $3,661 million. The one year growth was around 16.4% and the income grew by 20% last year.

The cell phone giant has anticipated taking a restructuring charge of $300 million in the form of 8 cents per share in 2007 to cover up for the payout to laid-off workers.

"Long-term, sustainable profitability is, and always has been, Motorola's top priority," said Chief Financial Officer Tom Meredith. "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."

CEO Ed Zander is also on the double to roll out new products in order to shoot up profits. Grabbing market share by reducing prices is a secondary step now as shareholders are pressurizing the company to boost their results.

The President and COO (Chief Operating Officer) of the company, Greg Brown, also tried to assure the public that the implementation of the price reductions will not have any adverse effects on the customer service, product quality or any other factor that affects the company’s growth.

Mobile phone analysts like Lawrence Harris has forewarned the company saying that the extra job cuts might help them improve their profitability but it will not be enough to attain higher profits. He added that the company needs to build its range of phones as their product line is the main drawback.

However, William Choi, a Jefferies & Co. analyst in New York, still advises investors to “hold” the shares. He said, ``They're doing the right things. It doesn't solve the main problem they currently have, which is to strengthen their portfolio of handset products.''

The US Company having a market capitalization of 42.31B will pay its next dividend scheduled on 13th June. Its shares opened at 18.20 with a high of 18.37 and low of 18.12 in morning trading on the New York Stock Exchange.

Ed Zander, Motorola's chairman and chief executive officer also introduced its MOTO RAZR sequel, RAZR 2 series (including MOTO Z8, MOTO Q 9 and ROKR Z6 handsets) and five other mobile phones in its 2007 new mobile collection to be available in Asia during July and elsewhere later in the summer.

Motorola presently holds approximately 18% of market share as compared to the largest cell phone giant Nokia which holds around 32%.

Motorola, the American multinational communications company is based in Schaumburg, Illinois; a Chicago suburb formed a unique joint venture company with Wipro called WMNetServ to provide managed services and professional service to Motorola customers worldwide.

Its main products are radio related, defense electronics, cellular infrastructure equipment microprocessors, and mobile phone manufacturing.

Wwith Inputs from United Press International.