Motorola slashes outlook, CFO retires

Motorola warned on Wednesday that it would announce a first-quarter loss and cut its sales forecast as the second-largest mobile phone maker shook up management.

The company, which cited weaker-than-expected sales of mobile devices for the downturn, undertook the reshuffle to shore up its senior team after Ron Garriques, former head of its mobile phone business, quit to join Dell last month.

Greg Brown was appointed president and chief operating officer. Thomas Meredith was named acting chief financial officer, effective from April 1, replacing David Devonshire who is retiring.

The phonemaker said it would accelerate its share repurchase programme, increasing the size of its current scheme to $7.5bn to buy back an extra $2bn in shares.

The accelerated share buy-backs are an apparent attempt to appease Carl Icahn, the billionaire Wall Street investor who has been buying Motorola stock and who is seeking a seat on the board.

Mr Icahn, who has signalled his intention to acquire a stake of more than 6 per cent, making him the company’s second-largest shareholder, had urged the board to use the bulk of its cash reserves, which stood at $11.3bn (£5.7bn) at the end of last year, to buy back stock.

Motorola said it expected sales for the first quarter of 2007 to be between $9.2bn and $9.3bn, compared with previous projections of $10.4bn to $10.6bn, and to report a loss of between 7 and 9 cents a share after charges.

Ed Zander, Motorola’s chief executive, said: “Performance in our mobile devices business continues to be unacceptable and we are committed to restoring its profitability.

“After a further review following the leadership change in our mobile devices business, we now recognise that returning the business to acceptable performance will take more time and greater effort.”

Motorola said the reduced sales projection reflected lower-than-anticipated sales and operating earnings in the mobile phone division, due to lower overall unit volumes, and a difficult pricing environment, particularly for low-tier products, and Motorola’s limited portfolio of 3G phones

The company said the lower sales volume mainly reflected its strategic shift towards improving margins, rather than focusing primarily on market share growth. “In emerging markets, particularly India, Africa and South Asia, competitors lowered prices at a faster rate than anticipated,” the company said.