Shares in Motorola plunged 11 percent on Friday after the company's No. 2 executive, Edward D. Breen, was named chief executive of Tyco International.
Investors showed skepticism that Motorola's CEO, Christopher Galvin, and Breen's successor as president and chief operating officer, Mike Zafirovski, could carry out a viable restructuring plan and return Motorola to profitability.
Breen, who had come to Motorola in 2000 through the acquisition of General Instrument, the supplier of cable television equipment where he was chairman and chief executive, was widely seen as the force behind a broad cost-cutting effort that had allowed Motorola to perform better than many of its peers in the weak telecommunications industry.
"One of the primary reasons we held optimism for a Motorola turnaround was the no-nonsense, results-oriented style that Mr. Breen brought to the company," Mark Roberts, an analyst at Wachovia Securities, said in a report. "We view Mr. Breen's departure as a negative for Motorola."
Motorola faces numerous challenges in addition to doubts over its senior leadership. The company was the world's largest maker of cellphones a decade ago. Now it accounts for only about 13 percent of the market after Nokia of Finland and Ericsson of Sweden offered fierce competition.
In the most recent quarter, Motorola reported a loss of US$2.32 billion because of costs related to the elimination of 7,000 jobs, closing factories and potential losses from a loan to a wireless company in Turkey. Revenue declined 10 percent, to US$6.74 billion.
Still, as weak as these results may have seemed, they were seen as an improvement by many investors who had recently become pleased with changes they considered to have largely been put in place by Breen. As a result of cost-cutting efforts, Motorola's work force is expected to shrink to 93,000 from 150,000 in 2000.
Zafirovski will continue as president of the company's personal communications sector until a successor is named.
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