Motorola Inc will eliminate 7,000 jobs and have US$3.5 billion in reorganization costs, ensuring a second straight annual net loss at the world's No. 2 maker of mobile telephones.
The reductions will amount to 7 percent of the workforce and shrink Motorola to its size of the mid-1990s, "the era prior to the excesses of the telecom and dotcom booms," Chief Executive Officer Christopher Galvin said in a statement.
"This hopefully is the final piece in the puzzle to position them for a bottoming and ultimately an improvement in their major business lines," said David Katz, who manages US$800 million as chief investment officer of Matrix Asset Advisors Inc. Matrix holds 368,000 Motorola shares.
Galvin has vowed to return Motorola to profitability this year, excluding severance and other costs. Last year, the company had its first annual loss, before restructuring expenses, in 71 years as sales of handsets, cellular-network gear and chips fell.
Next month, Motorola expects to report its sixth straight quarterly loss excluding certain costs.
Motorola maintained its revenue and profit forecasts. Sales this year will fall by 5 percent to 10 percent from US$29.5 billion lst year. The company still expects profit, excluding certain costs, of at least US$0.04 a share this year. Motorola expects to be profitable in the second half, excluding some expenses. It didn't provide other details.
"We're focused very, very hard on profit and cash," Galvin said on a conference call.
Motorola said 90 percent of the US$3.5 billion in reorganization costs and writedowns will occur in the current quarter, with the rest in the second half.
Less than 20 percent of the costs will be in cash; reductions in the value of semiconductor plants, investments and other assets and a bad loan will account for the rest, Motorola said.
The expenses will reduce earnings this year by US$1.10 a share, Motorola said. The company said in March it would have a loss including costs such as severance and writedowns.
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