Analysts hint at further Motorola job cuts

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Motorola, the world’s second largest mobile phone manufacturer, may need to announce more job cuts shortly if it is to succeed in turning around its loss-making mobile phone buisiness this year, analysts warned on Wednesday.

Fresh from a series of meetings with senior management in New York, some analysts suggested that additional job cuts could be announced as soon as next month but also cautioned that cost-cutting measures already underway could take time to implement.

Ed Zander, Motorola’s embattled chief executive, acknowledging again in an interview earlier this week after unveiling a new phone line-up that Motorola must cut costs further if it is to compete effectively – especially in price-sensitive emerging markets.

However, Mr Zander, who has already implemented 3,500 job cuts, avoided announcing any specific new initiatives. He has promised to cut costs by $400m by year’s end, in part by further streamlining supply chain and manufacturing operations as part of the effort to turn the core lossmaking mobile phone business round by the fourth quarter.

Further savings are likely to come from integrating several big acquisitions that Motorola has made over the past six months, including Good Technology, the mobile messaging technology specialist.

Nevertheless, some analysts who met Thomas Meredith, Motorola’s chief financial officer, after the launch event have begun speculating that Motorola willneed to cut more jobs if it is to meet its targets. “We believe another lay-off is imminent,” Piper Jaffray’s Michael Walkley wrote in a note to investors on Wednesday.

Meanwhile, Goldman Sachs analysts who also attended the event noted: “More restructuring is likely as the chief financial officer reiterated prior comments that headcount reductions announced at the beginning of the year will not be sufficient to drive positive operating margins in mobile devices during 2007.”

Most analysts also expressed some doubts about whether the new handsets unvielled by Motorola this week were sufficient to turn the business around. Certainly, if Mr Zander and Motorola’s product designers were hoping for rave reviews for the 2007 line-up of new handsets they will have been disappointed.

As expected, the lineup from Motorola, included a new version of the flagship Razr phone and several handsets designed to help the second largest mobile phone maker compete more effectively in the increasingly competitive world market.

However, as analysts pointed out, all but one of the new handsets – the Razr2 – had been preannounced at trade shows earlier this year and while investors will be relieved that Motorola will indeed begin shipping them soon, on reflection they will also be concerned that there was little if any “buzz” around the new products.

As Goldman Sachs analysts said in their note to investors on Wednesday, “We came away dissapointed that only one new product was introduced at the event....additionally in our view, new products are not likely to move the needle in 2007.”

To be fair, Mr Zander and other senior Motorola executives were at pains to point out that the lineup represented ‘just the start’ of what he hopes will be a rbound in Motorola’s fortunes.

Casey Keller, Motorola’s recently appointed chief marketing officer, said marketing efforts around the new phones would emphasise the “substance of the user experience” rather than the physical form factors and “product silos”.

“It’s not just about style any more,” said Mr Zander, Motorola’s chief executive. “We got used to just pushing handsets out there and seeing them sell. Now we have to think differently.”

Mr Zander and other Motorola senior executives also emphasised that there was still much to do to get momentum at Motorola moving. They said the handset launch was in large part aimed at reassuring employees, subject in recent months to a barrage of negative publicity and the sudden reversal of fortunes.

“It’s never as good as it seems or as bad as it seems,” said Mr Zander.

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