Motorola posts big loss, plans to cut 3,000 jobs

Motorola posted a hefty loss in the third quarter Thursday, citing the continued troubles of its cellphone division. The company will postpone the planned spinoff of the unit, and cut more jobs.

The maker of communications gear said it would get rid of 3,000 jobs by April, with about 2,000 of them coming from the cellphone unit. The company last announced 2,600 job cuts in April.

Motorola lost $397 million, or 18 cents per share, in the July-September period. It had earned $60 million, or 3 cents per share, in the same period a year ago.

Sales fell 15% to $7.48 billion.

The loss included 23 cents of charges, mostly for restructuring costs. Without the charges, Motorola would have earned 5 cents a share, reflecting unexpectedly strong results in its non-cellphone operations. Analysts polled by Thomson Reuters had on average expected the company to earn 2 cents per share on revenue of $7.82 billion.

For the fourth quarter, Motorola said it expects to earn 2 cents to 4 cents per share. Analysts polled by Thomson Reuters had expected the company to earn 7 cents per share in the quarter, excluding items.

Shares of Motorola fell 31 cents, or 5.7%, to $5.15 in afternoon trading, even as the broader market rallied.

The job cuts are part of efforts to cut costs by $800 million next year, Chief Executive Greg Brown said.

Motorola sold 25.4 million cellphones in the third quarter, down from the 28.1 million it sold in the second quarter. The company had said it expected a slight decline. With an 8.5% market share, it lost the spot as No. 3 cellphone maker worldwide to Sony Ericsson in the quarter, according to research firm IDC. Nokia Corp. and Samsung Electronics Co. are No. 1 and No. 2, respectively.

For Motorola, "the loss of share continues to be extremely worrisome," said Rick Franklin, an analyst at Edward Jones. "This business continues to run without any wheels."

The cellphone unit lost $840 million, including a $370 million write-down of inventory. Revenue was $3.1 billion.

Sanjay Jha, who was appointed in August to lead the handset division, said the weak economy and stresses in the financial market were main reasons for the postponed spinoff. He said the unit would slim down its product portfolio and become a leaner organization.

Jha said the company had 20 major platforms for cellphones, making development unwieldy yet leaving Motorola with few products in the two categories that have been in demand this year: "smart" phones and very cheap phones.

He is pruning the portfolio to focus on three software systems: Windows Mobile, which Motorola already uses on a few smart phones; P2K, its own system, used on the Razr phone; and Android, a free operating system from Google Inc. Competitor HTC Corp. recently launched the first Android phone. Jha said Motorola will have one by the 2009 holiday season.

Designers at Motorola have been too focused on making "bright shiny objects," Jha said. In the future, he wants them to focus more on making phones easy to use.

The troubles of the cellphone division stem from its inability to produce a follow-up to a phone that was, for a while, the "bright shiny object" everyone had to have: the Razr phone.

Jha also said Motorola will pull back from the cellphone markets of Europe and parts of Asia, though Jha said China will remain a focus for the company, along with the Americas.

Motorola is not alone in seeing a decline in cellphone sales. IDC said Thursday that global handset shipments declined 0.4% from the second quarter to the third, even though the quarter normally sees a pre-holiday ramp-up.

Sales at Motorola's healthier units were essentially flat, and they boosted profits.

Home and Networks Mobility, which makes cable-TV set-top boxes, modems and related gear, saw its operating earnings increase 65% to $263 million, on $2.4 billion in sales.

Enterprise Mobility, which makes police radios and other communications equipment for organizations, posted operating earnings of $403 million, up 23%, on sales of $2 billion.

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