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
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.