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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: Software should be much better
By Wonga on 5/31/2007 1:09:26 PM , Rating: 3
I agree.

I've had five Motorola phones, all of which were unreliable. The first one, back in the early days, randomly rebooted. The second one, a V600, had faulty buttons. The third one, a replacement for the second, turned off one day and never came back on. The four one, again a replacement V600, randomly rebooted and had faulty buttons again. The fifth one, again a replacement, rebooted when it felt like it and in the end I sold it on eBay to some guy who didn't know any better. All of the V600s had slow software too - writing a text message tooks ages, the writing was always lagging behind the buttons you pressed.

I know many people who have owned a RAZR and they all say the software is unreliable, random reboots etc.

Motorola really needs to get their software in order. Reliability is key - a phone that reboots in the middle of a phone call is a joke. As far as I'm concerned, the pretty looks can come second. Maybe that's why I'm happy sticking with a 5 year old phone.

RE: Software should be much better
By darkpaw on 5/31/2007 5:17:30 PM , Rating: 2
I made the mistake of buying a Moto Q two months ago. I've been using cell phones for over 10 years and have never had to reboot a phone so often. Of course I'm stuck with it now for two years, or at least until I can buy a used phone off ebay for a decent price.

By Oregonian2 on 5/31/2007 6:30:53 PM , Rating: 2
The bummer thing about replacements is that they're probably "refurbs", meaning that they were broken units returned by somebody else and supposedly are fixed (but often aren't, still having the problem they had before). I hate refurbs, had so much trouble with them no matter who it came from (other than Plextor who comes to mind).

By Axbattler on 6/1/2007 3:16:08 AM , Rating: 2
To be honest, Motorola mobile have always been aesthetics first (fair enough if that's what their customers want). I didn't know they had such serious reliability issues, but I was always put off by the lack of functionalities in their phones. I've stepped down from smartphones given that it is another side of the spectrum that I can't justify (cost wise), but there are many phones in the same price range as Motoloras that provide more in general assuming the Motorola 'look' is not crucial.

"We shipped it on Saturday. Then on Sunday, we rested." -- Steve Jobs on the iPad launch

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