Motorola plans to trim an additional 4,000 jobs this year, bringing the total cuts for 2007 to more than 11% of its work force, as the world's No. 2 mobile phone maker reduces costs to return to profitability.
Motorola , which had already planned to complete 3,500 job reductions by June 30, on Wednesday forecast restructuring charges of about $300 million, or about 8 cents per share, over the rest of 2007 as a result of the latest lay-offs.
The company, which has been losing market share to rivals such as market leader Nokia due to a lack of advanced phones and tough price competition, had said in April that it would announce additional cost-cutting plans by June.
The latest planned cuts at the company, which had 66,000 employees at the end of 2006, will be made by the end of the year, according to Motorola, which did not provide specifics on the break-down of the lay-offs.
But while the job cuts will help with costs, Oppenheimer analyst Lawrence Harris said Motorola, which has been criticized for failing produce a hit to follow its popular Razr phone, would need better phone models to impress investors.
"It will certainly help them return to profitability but it's not enough to get them to the double digit profit margins they seek," he said, adding: "They need exciting new products."
Cost Savings
Motorola's stock rose to $18.46 in after-hours trade following the news, up 1% from its close of $18.28 on the New York Stock Exchange.
Schaumburg, Illinois-based Motorola forecast $600 million in annual cost savings in 2008 as a result of the latest job cuts, other spending controls and site rationalization. It said it was on target to save $400 million from the 3,500 lay-offs announced in January.
The company also said there would be no adverse effect on customer service or product quality as a result of the cuts. "It's happening in all businesses functions and regions," company spokeswoman Jennifer Erickson said of the cuts. "A lot is through normal attrition and some is through involuntary separation."
She said Motorola would continue to hire in critical areas across the company.
The company, which also makes network equipment and television set-top boxes, has said in recent months it was shifting the priorities of its phone business to improving profitability from gaining market share at all costs.
In a separate statement, Motorola, which recently ended a bitter proxy battle with billionaire investor Carl Icahn, said on Wednesday that Icahn had won more than 43% of the votes for a seat on the board at its annual meeting in May.
Motorola's preferred candidate, John White, was voted in over Icahn, the activist investor who had taken a stake of roughly 3% in the company in an effort to get onto its board.