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Big job cuts at Motorola in effort to return to profitability

Motorola, Inc. today revealed that it is already on target to for its workforce reduction of 3500 by June 30 and is on track to achieve the $400 million in annualized cost savings that it announced in January. That’s not the end of the job slashings, however, as the company says that another 4000 layoffs – more than 6 percent of its workforce – are on the way.

The 4000 addition job cuts, along with prioritization of investments, discretionary-spending and expense controls, are expected to net Motorola another $600 million in annualized cost savings in 2008.

"Long-term, sustainable profitability is and always has been Motorola's top priority," said Tom Meredith, chief financial officer, Motorola, Inc. "Today's actions are an update to the commitment we made during our first-quarter earnings conference call -- to drive out additional costs -- and a continuation of the plan we announced in January. We are confident that the steps we are announcing today, together with the actions that we have outlined previously, will further improve the company's Financial and operational performance and create value for our stockholders."

"We are taking steps to ensure that, as these cost reductions are implemented, there will be no adverse impact on customer service and support, product quality and those research and development programs that are expected to contribute meaningfully to Motorola's revenues, profits and cash flow in 2008 and beyond," said Greg Brown, president and chief operating officer, Motorola, Inc.

For the remainder of this year, the company expects costs of approximately $300 million, or approximately $0.08 per share, and will consist primarily of severance and related expenses resulting from the workforce reductions.

Mobile phone analysts are pointing at Motorola’s weak product lineup as a culprit for the company’s sagging bottom line. Analyst Lawrence Harris said to the BBC, "The extra job cuts will certainly help them return to profitability but it's not enough to get them to the double digit profit margins they seek. They need exciting new products."

When Motorola released the original RAZR phone over two years ago, it was the hottest and most stylish gadget on its hands. Since then, Motorola has been unable to replicate the RAZR’s success in follow-up products such as the KRZR.

Despite that the RAZR remains one of the U.S. market’s most ubiquitous handsets, the majority of RAZR sales were at low, mass-market price points – a far cry from the profit margin realized during the phone’s introduction at $800.

After countless different colors and other variations, Motorola is finally releasing the true RAZR2 in July. The true sequel to Motorola’s most successful handset features 2GB of memory, a 2 MP camera, better sound quality and much improved software with Linux and Java support.

“With the modern style and powerful performance of RAZR2, Motorola is once again redefining the cell phone,” said Ed Zander, Motorola’s chairman and chief executive officer. “This device takes the world’s best-selling feature-phone to the next level. Combining groundbreaking new features and an even slimmer exterior than the original icon, the RAZR2 is capable of giving consumers the ultimate mobile experience.”

With intense cost-cutting measures in place and bets placed on the upcoming RAZR2, Motorola hopes to revive its mobile business before losing more marketshare to competitors Nokia and Samsung. Following the restructuring news, shares of Motorola rose 17 cents to $18.45 in extended trading, according to Bloomberg.



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RE: Good to know
By OrSin on 5/31/2007 10:26:40 AM , Rating: 3
The out sources will stop soon. When the dollar crashs on the world market and the oil is sold for the Euro and Yen, there will be no need to outsource since keeping jobs here will be cheaper. Not a bright furture either way.


RE: Good to know
By Chadder007 on 5/31/2007 11:11:28 AM , Rating: 3
Yeah, its gotten ridiculous. Might as well just have a CEO chair based in Dubai, all manufacturing workers based in China , and all call centers in India.
They will eventually have a lot of the jobs shipped out, leaving few people in America to have the ability to even buy the products the companies want to push.


RE: Good to know
By retrospooty on 5/31/2007 11:34:01 AM , Rating: 2
"Might as well just have a CEO chair based in Dubai, all manufacturing workers based in China , and all call centers in India."

Totally untrue... There is alot of manufacturing in Taiwan, Malaysia and Mexico, and a great deal of call centers in the Phillipines as well. ;)


RE: Good to know
By FITCamaro on 5/31/2007 11:47:41 AM , Rating: 2
quote:
eaving few people in America to have the ability to even buy the products the companies want to push.


Exactly. Without good engineering jobs here in America, a lot more jobs will be lost as a result of people not being able to afford certain products. Other than doctors or lawyers, who's going to buy the luxury cars if theres no engineers who make a good amount of money? Other than those who lease them of course.

And the dollar isn't going to get that low. In fact its looking to be coming back from what I read recently.


RE: Good to know
By Talcite on 5/31/2007 12:55:13 PM , Rating: 2
I don't understand why people always equate a low dollar with a horrible economy. That is simply not true. A low dollar means increased exports since foreign investors can buy more of our products at a lower price. A higher dollar means increased imports. There is no importance to a nominal variable like the dollar in the long run. Now if you had said the real exchange rate was decreasing, then I'd be worried because that would indicate a lower living standard.

Anyways, there's no point in fretting about domestic or foreign goods, jobs or whatever. If free trade ends up taking hold internationally like it has in north america, then we'd all win out in the end. Of course the 'end' means 20 or 30 years from now. In the mean time, things might get slightly ugly. We wouldn't regress to the point where we would be living in shacks of course, but we certainly wouldn't be spending disposable income on useless things anymore.


RE: Good to know
By johnadams on 6/1/2007 3:11:06 AM , Rating: 2
I would think American engineering jobs that would remain are those that are obviously not outsourceable, like the design leads and those with management responsibilities/require heavy interactions with the business.

Would the engineering curriculums be updated to reflect this?


RE: Good to know
By Harold02 on 6/2/2007 10:21:15 AM , Rating: 2
One tiny problem. You don't e.g. become a design lead without having first been in the trenches, executing other people's designs, and then moving up the chain doing more and more design yourself.

There is no "update" to engineering curriculums that can replace experience.

We are eating our seed corn by assuming all the lower level stuff can be outsourced, contracted, H-1B-ed, etc. There will be very few design leads to replace the ones who eventually retire or get laid off because they are "too expensive."

Management: well, at least in programming, I've never had a good one who wasn't both once a programmer and currently up to date on the technology being used in the project. Hard to manage when you don't know the first thing about what your people are doing....

Again, there is no substitute for experience. The poor functional quality of so many designed in the US products can in part be attributed to this.


RE: Good to know
By johnadams on 6/3/2007 6:05:10 AM , Rating: 2
Good point, thx.


RE: Good to know
By Harold02 on 6/3/2007 7:24:34 AM , Rating: 2
You're welcome.

BTW, I should have said "a decade of experience" above, since that's about how long it takes to become a true expert---there's something seriously wrong in the field of programming in the US when 2-5 years of experience allows the prefix "Senior" to be added to titles.

Consistently developing software that "mostly works", year after year, is extraordinarily hard. It is one of the "secrets" of success of Microsoft (although the Vista fiasco shows that part of the company has lost a lot of that ability, but not e.g. the Office part). Look at all the "one trick pony" companies that develop something good, once, and then lose their ability to develop software except for minor refinements (sometimes), generally for good, generally when they lose the original team due to burnout or politics.

Lotus, Ashton-Tate (dBase), for a critical year or so Borland couldn't get Windows versions of their office products to work, Wordperfect did have something that didn't crash in Windows 3.x, but was unusable if you e.g. used figures (they would regularly drop down to the bottom of your document), etc. etc. These are just some of the best known examples.

I'd be a lot more comfortable about the future of this field in the US if there was the slightest general recognition that doing this right is hard , but as long as that is generally absent, companies like Microsoft will continue to do fairly well simply because, no matter how "bad" their stuff is in various ways, at least it doesn't crash every minute or two.

Achieving that minimal level of function is much harder than most people realize, witness how often Motorola's phones are said to crash (probably by people who use them in just a slightly different way that Motorola's engineers anticipated or tested for). As Motorola's bottom line shows, cool looks will get you only so far for only so long.


“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads











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