Motorola cuts 4,000 more jobs: Mobile devices division loses 3,000, or more than 10%

Motorola Inc. today said it shipped only 19 million handsets in the fourth quarter of 2008, down from 25.4 million in the third quarter and less than half the 40 million handsets shipped during the fourth quarter of 2007.
The company also said it would lose 7 cents to 8 cents per share on $7 billion to $7.2 billion in revenue, below analysts’ expectations.
The news was announced after the market closed. Motorola’s stock dropped a little more than 1% to $4.07 in trading following the announcement. (The 52-week range is $3.00 to $14.35.)
The collapse in what had been its leading revenue and profit division apparently prompted the draconian job cuts, also announced today. About 3,000 jobs will be cut in its mobile devices division, which one analyst said had about 26,000 employees prior to today’s news. The other 1,000 cuts would come from “corporate functions and other business units.”
Motorola said it would provide full fourth-quarter results on Feb. 3, an earnings schedule that has been slipping later and later as the company continues to struggle with its turnaround efforts.
“This is crazy,” said Tero Kuittinen, analyst at Global Crown Capital L.L.C. “It is unacceptable. They will have to make really hard decisions about their product lines and regions in which they can compete. I’m unsure how they could possibly maintain their Asian presence, for instance.”
“Motorola’s biggest issue is that their product development cycle is so long,” Kuittinen added. “And that cannot be improved with layoffs. The more you shrink, the less competitive you become.”
Stuck in the middle
The analyst suggested that Motorola might have to pull out of both low-end and high-end handset sectors and focus on mid-tier feature phones.
“It’s extremely difficult to succeed in the middle,” he warned, “but it’s even harder on the edges of the price range.”
Looking ahead, analyst Mark McKechnie at Broadpoint.AmTech said Motorola has a good captain but may be caught in doldrums that impede progress.
“Our checks suggest that (mobile devices leader Sanjay) Jha’s turn-around plans for handsets seem intelligent, but execution remains a challenge given job-loss concerns,” McKechnie wrote in a note to investors. “We do not see the fear subsiding as we expect another round of job cuts, possibly as soon as March.”
Motorola’s other two units are Enterprise Mobility Solutions and Home and Networks Mobility, which have performed relatively well over the past year as the mobile devices business has foundered.
“Adjusting for the magnitude of the miss in handsets, the other segments appear to be roughly in line with our projections,” wrote analyst Ittai Kidron at Oppenheimer. “While the job cuts are good on the surface, they make us question whether or not there are enough resources left to turn the handset business around and end the bleeding. A decision to shut down the handset division would be difficult, but one that may provide temporary relief to investors.”
The company said the job cuts – in addition to 3,000 job cuts announced last quarter – would yield an annual savings of $700 million in 2009. The job cuts and other cost-cutting measures announced last quarter are expected to yield savings of $800 million.
Taken together, the cost-cutting measures announced today and in the fourth quarter will save the company $1.2 billion in 2009, said Jha, co-CEO of Motorola and leader of the mobile devices division since last summer.
Jha said the company was making “good progress” on developing smartphones for market this year – the bright spot in the industry during a year forecast to see negative growth in handsets.
Article updated Jan. 15 to include additional commentary, stock information.