Motorola Plans Additional 4,000 Layoffs, Bets on New RAZR

Big job cuts at Motorola in effort to return to profitability

Motorola, Inc. today revealed that it is already on target to for its workforce reduction of 3500 by June 30 and is on track to achieve the $400 million in annualized cost savings that it announced in January. That’s not the end of the job slashings, however, as the company says that another 4000 layoffs – more than 6 percent of its workforce – are on the way.

The 4000 addition job cuts, along with prioritization of investments, discretionary-spending and expense controls, are expected to net Motorola another $600 million in annualized cost savings in 2008.

"Long-term, sustainable profitability is and always has been Motorola's top priority," said Tom Meredith, chief financial officer, Motorola, Inc. "Today's actions are an update to the commitment we made during our first-quarter earnings conference call -- to drive out additional costs -- and a continuation of the plan we announced in January. We are confident that the steps we are announcing today, together with the actions that we have outlined previously, will further improve the company's Financial and operational performance and create value for our stockholders."

"We are taking steps to ensure that, as these cost reductions are implemented, there will be no adverse impact on customer service and support, product quality and those research and development programs that are expected to contribute meaningfully to Motorola's revenues, profits and cash flow in 2008 and beyond," said Greg Brown, president and chief operating officer, Motorola, Inc.

For the remainder of this year, the company expects costs of approximately $300 million, or approximately $0.08 per share, and will consist primarily of severance and related expenses resulting from the workforce reductions.

Mobile phone analysts are pointing at Motorola’s weak product lineup as a culprit for the company’s sagging bottom line. Analyst Lawrence Harris said to the BBC, "The extra job cuts will certainly help them return to profitability but it's not enough to get them to the double digit profit margins they seek. They need exciting new products."

When Motorola released the original RAZR phone over two years ago, it was the hottest and most stylish gadget on its hands. Since then, Motorola has been unable to replicate the RAZR’s success in follow-up products such as the KRZR.

Despite that the RAZR remains one of the U.S. market’s most ubiquitous handsets, the majority of RAZR sales were at low, mass-market price points – a far cry from the profit margin realized during the phone’s introduction at $800.

After countless different colors and other variations, Motorola is finally releasing the true RAZR² in July. The true sequel to Motorola’s most successful handset features 2GB of memory, a 2 MP camera, better sound quality and much improved software with Linux and Java support.

“With the modern style and powerful performance of RAZR², Motorola is once again redefining the cell phone,” said Ed Zander, Motorola’s chairman and chief executive officer. “This device takes the world’s best-selling feature-phone to the next level. Combining groundbreaking new features and an even slimmer exterior than the original icon, the RAZR² is capable of giving consumers the ultimate mobile experience.”

With intense cost-cutting measures in place and bets placed on the upcoming RAZR², Motorola hopes to revive its mobile business before losing more marketshare to competitors Nokia and Samsung. Following the restructuring news, shares of Motorola rose 17 cents to $18.45 in extended trading, according to Bloomberg.