Posted on: Thursday, October 11, 2001

Motorola cuts 7,000 more jobs

By Dave Carpenter
Associated Press

CHICAGO — Motorola Inc. said yesterday it's shrinking its work force by another 7,000 jobs and further lowering expectations for world cell phone and semiconductor markets as it careers toward a fourth straight quarterly loss.

It also dropped its upbeat outlook for a turnaround in the global economy in the first half of 2002, saying the Sept. 11 attacks now make that impossible to predict.

Motorola, considered a technology bellwether, again portrayed a largely bleak outlook for the near future after a third quarter in which it incurred a net loss of $1.4 billion and failed to turn a profit in most of its businesses.

"People who were counting on a Motorola turnaround were sadly mistaken," said Todd Bernier, an analyst for Chicago-based Morningstar. "It's not here yet."

The latest job cuts, which will include an unspecified number of layoffs, bring the total announced since last December to 39,000, or 26 percent of the company's work force. Motorola officials suggested more may be coming.

"Motorola will continue to take appropriate cost-reduction actions," president and chief operating officer Robert Growney told analysts on a conference call.

The Schaumburg, Ill.-based company already has eliminated 4,000 of the positions Growney said were being cut, through sales of businesses. Spokesman Rusty Brashear said many are in the Integrated Information Systems Group, which Motorola sold to General Dynamics in August, and did not lose their jobs.

The other 3,000 cuts will be made companywide, with specifics not yet determined. Motorola's work force, 147,000-strong last December, is to be at 108,000 by year's end.

Instead of the 1-cent per-share profit gain that a consensus of analysts surveyed by Thomson Financial/First Call had estimated for the fourth quarter, Motorola said it now anticipates a 4- to 5-cent loss. Revenues are seen as little-improved from the $7.4 billion of the third quarter, when they tumbled 22 percent from a year earlier. Analysts had expected $8.2 billion in the fourth quarter.

While a series of flawed strategies and high-cost problems got Motorola into its current hole, the economic downturn is blamed for extending it. A series of new products in its cell phone unit, its top moneymaker, have won generally high grades from experts and consumers and provide a glimmer of hope.

"Our long-term future is quite bright," chairman and chief executive Christopher Galvin told analysts. "We believe that when the overall world economic conditions change, we will flourish."

For the short term, the No. 2 mobile phone manufacturer behind Nokia sees continued slight improvement for phone sales and profits in the fourth quarter. Motorola hopes to build on a two-point gain in market share which it said lifted it above 17 percent — still a far cry from the 33 percent of five years ago.

But the company is scaling back estimates of industrywide sales to 380 million to 400 million phones in 2001, well short of the 600 million analysts once predicted, and now sees only 420 million to 450 million units sold in 2002.

The outlook for semiconductors, Motorola's second-biggest business, also was downgraded. The industrywide decline, extending to a fifth straight quarter, will now result in a 25 percent to 30 percent drop for this year and postpone a recovery until next year. 2002 sales are estimated to grow 5 percent to 10 percent over this year.

Lower worldwide demand also led to unimpressive quarters for the company's broadband and wireless infrastructure businesses.

Analyst Brian Modoff of Deutsche Banc Alex Brown said the results are the latest evidence the company should sell its badly slumping chip business as a first step toward better synchronizing its disparate parts.

"They're doing a good job in terms of cost control and getting handsets improved relative to their competition," Modoff said. "But their biggest challenge remains managing these multiple divisions efficiently."

Vivian Mamelak, an analyst for Arnhold and S. Bleichroeder, said Motorola's yearlong overhaul ultimately will need to take a different direction.

"This is a company that's going to have to go into new businesses," she said. "What Motorola will be in five years is probably a very different company than it is today."