Motorola overhauls operations on expected Q1 losses

Motorola Inc. said its ailing mobile-phone business is faring worse than the company had expected, and as a result the world’s No. 2 handset vendor will post a loss for the first quarter. In order to reverse the situation, Motorola’s Ed Zander announced an executive overhaul, revised cellphone strategy and an expansion of the company’s stock buy-back program.
“Performance in our mobile devices business continues to be unacceptable, and we are committed to restoring its profitability,” Zander said. “After a further review following the leadership change in our mobile devices business, we now recognize that returning the business to acceptable performance will take more time and greater effort.”
Motorola’s cellphone chief Ron Garriques recently left the company for computer maker Dell.
Motorola placed much of the blame for its expected first-quarter loss on a pricing war in emerging markets, which likely was driven by Nokia Corp. Motorola said that, since it is now concerned with profits rather than market share, it “chose not to match prices in all instances” during the war.
And as part of Motorola’s overhaul, the company is bidding farewell to its CFO David Devonshire. The company will replace Devonshire with Thomas Meredith, currently general partner of investment-management firm Meritage Capital L.P.
Separately, Greg Brown will take charge as Motorola’s president and COO, and will be responsible for overseeing Motorola’s cellphone, networks, connected home and supply-chain operations. Brown was previously president of the company’s Networks and Enterprise business.
As head of Motorola’s cellphone business, Brown will oversee a number of new Motorola initiatives:
–Deploy Linux/Java software across mid- and high-tier devices;
–Accelerate a more “cost-competitive” chip strategy;
–Market “experience as well as design;”
–And improve the design processes to lower prices.
Motorola said its cellphone business will post an operating loss in the first quarter, but that the business should recover over the course of the year to end 2007 in the black.
Finally, Motorola also announced it will increase the speed of its stock-buyback program and expand it from $4.5 billion to $7.5 billion.
Motorola’s stock tumbled to a two-year low of around $17.50 per share on the news.