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Motorola executive offers gloomy assessment

"Our consistency of new product introduction is still not where it needs to be."

Greg Brown, chief executive officer of Motorola

Motorola Inc's new CEO Greg Brown spooked investors with a gloomy assessment of the cellphone maker's inability to turn around its ailing handset division, saying a recovery will take longer than expected.

Shares nose-dived more than 23 percent to a four-and-a-half year low on the company's outlook for worse-than-anticipated first-quarter results and Brown's acknowledgment on Wednesday that Motorola is behind on developing promising new products.

Motorola also reported results from the fourth quarter that were about as weak as analysts had feared, with net profit falling 84 percent and mobile phone sales down 38 percent.

Brown said global market share -- already down to 13 percent late last year from 23 percent at the end of 2006 -- is continuing to drop as Nokia and other competitors carve into its sales.

"The recovery in Mobile Devices will take longer than expected and there is a lot more work to be done," said Brown, who took over after Ed Zander resigned following four roller coaster years.

"Demand for some of our products has slowed in an intensified competitive landscape," he said later in a conference call. "Our consistency of new product introduction is still not where it needs to be. And we still have gaps in the portfolio in areas that are experiencing high rates of growth, including 3G [third-generation], China and other emerging markets."

Motorola shares, which traded on Wednesday at more than seven times their recent average volume, dipped to US$9.43 -- their lowest price since Aug. 14, 2003 -- then recovered to close at US$10.01, down US$2.31 or 18.8 percent. They have lost 62 percent of their value in the last 15 months and are down 38 percent so far this year.

JMP Securities analyst Samuel Wilson said there's "still a long way to go before Motorola is fixed."

"Motorola still has a number of issues with its volatile business model. We believe it may be one to two years before the company has redeveloped its handset business to be less hits-driven and more platform-oriented," he said in a note to investors.

The company forecast a first-quarter loss from continuing operations of US$0.05 to US$0.07 per share, below analysts' consensus estimate of US$0.10 per share.

Brown indicated in response to an analyst's question that more cost cuts are possible in the cellphone division. The company already cut 7,500 jobs last year to try to stem its slide.

For last year, Motorola had a net loss of US$49 million, or US$0.02 per share, compared with a profit a year earlier of US$3.67 billion, or US$1.46 per share. Revenue fell 15 percent to US$36.6 billion from US$42.8 billion.
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