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Motorola replaces top financial officer

Motorola Inc replaced its chief financial officer in a shakeup of top management as it slashed its first-quarter sales forecast, blaming weaker-than-expected revenue from its cell-phone unit.

Still reeling from sales and profit problems that emerged in the fourth quarter, the company said on Wednesday it now expects to report a first-quarter loss because of what chairman and CEO Ed Zander said was an "unacceptable" performance by its mobile device business.

Thomas Meredith was named the acting chief financial officer, effective April 1. He replaces David Devonshire, 61, who will retire from the position. Zander also named Greg Brown, president of the company's networks and enterprise business, to the vacant posts of president and chief operating officer.

The announcement after markets closed reflected even deeper turmoil within the Schaumburg, Illinois-based company just a month after the head of its embattled handset business resigned.

Motorola shares tumbled 4.9 percent, to US$17.82, in extended-hours trading after closing the New York Stock Exchange session down US$0.08 to $18.74. The stock has shed 9 percent this year after a 9 percent decline last year.

The world's No. 2 cellphone maker behind Nokia said it now expects sales for the first quarter US$9.2 billion to US$9.3 billion, down more than US$1 billion from its January forecast of US$10.4 billion to $10.6 billion.

It said it expects to report a loss of US$0.07 to US$0.09 per share, including US$0.09 per share in charges. That compares with the US$0.17 profit forecast by analysts surveyed by Thomson Financial.

The company said it expects sales, profitability and operating cash flow for the full year to be "substantially" below its prior guidance.

"Performance in our mobile devices business continues to be unacceptable, and we are committed to restoring its profitability," Zander said. "After a further review following the leadership change in our mobile devices business, we now recognize that returning the business to acceptable performance will take more time and greater effort."

He said the company, no longer willing to boost market share at the expense of profit margin, decided not to match competitors' price cuts on some inexpensive models last month, and that hurt sales significantly.

"We decided in mid-February that we're not going to go chase that stuff [price cuts]," he said in an interview. "We did take down our revenue because of that and our volume numbers because of that, but it's the right answer long-term."

Besides reshuffling top management, Motorola said it will buy back more of its lagging stock, accelerating US$2 billion of share repurchases and increasing the size of its current share repurchase program to US$7.5 billion.

Motorola said the cellphone unit, its largest, likely will report an operating loss in the first quarter because of slower unit volumes, a difficult pricing environment and a limited 3G product portfolio that is keeping its results in Europe below expectations.

The company, which had been coming off a nearly two-year period of nearly unprecedented gains because of the popularity of the Razr phone, stunned Wall Street in January by disclosing a steep drop in profitability in the handset division that led to its least profitable quarter since 2004.

It said it was cutting 3,500 jobs and taking other steps to reduce costs following misjudgments on pricing and sales forecasts for its high-end phones.

Zander said he was dissatisfied with the pace of restructuring steps taken since Ron Garriques' Feb. 16 departure as head of the mobile devices business.

He maintained that the business should experience a gradual recovery in the second half and be profitable for the full year.
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