The latest flurry of turnaround plans for Motorola is being met with about as much enthusiasm as previous attempts to revive the company’s foundering mobile-phone business: not much.
During an Oct. 30 conference call discussing the third-quarter results that included falling sales and a wider loss, Motorola (MOT) co-CEO Sanjay Jha outlined plans to reduce costs, streamline the way the company makes products, and delay a spin-off of the handset business. Along with a dour warning that sales will continue to slump, the announcements did little to shore up confidence. Motorola’s already embattled shares tumbled 5.3% to 5.17. RBC Capital Markets analyst Mark Sue cut his 12-month Motorola price target to 7 a share from 8.
To trim losses and help eliminate $600 million in expenses, Motorola plans to cut about 3,000 jobs, two-thirds of them in the handset division. The company will also reduce its focus on certain markets, such as Europe, while stepping up emphasis on the Americas and China. Motorola also plans to retool products so that it makes low-end phones based on its own software and high-end phones that only run Microsoft’s (MSFT) Windows Mobile operating system and the Android software developed by the Google (GOOG)-led Open Handset Alliance.
Grim Outlook
The moves are aimed at restoring the company’s dwindling fortunes. In the third quarter, the operating loss at Motorola’s handset division widened to $840 million from $248 million a year earlier. Unit sales dropped 32%, to 25.4 million from a year earlier, and the company’s market share plummeted to 8.4% globally, down from 9.5% in the second quarter and 22.4% in 2006, when Motorola’s Razr handset was all the rage. In the period, Motorola lost its No. 3 place among the world’s largest handset makers to Sony Ericsson, according to Strategy Analytics.
Prospects have only worsened this quarter — traditionally…