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Motorola lays off 4000 in search for missing profit

Motorola lays off 4000 in search for missing profit

In an extension of a cost-cutting programme it began in January, Motorola in the US says it will lay off 4000 more workers.

The move will help the company to save US$600 million annually starting in 2008, including additional money-saving measures like prioritising its investments, continuing discretionary-spending controls, cutting general and administrative expenses and site rationalisation.

Although it trails only Nokia in sales of wireless handsets, Motorola has struggled to translate its sales into profits. The company began this restructuring programme after watching its profit drop sharply, from $1.2 billion in the fourth quarter of 2005 to $624 million for the fourth quarter of 2006. The results were even worse for the first quarter of 2007, as Motorola posted a loss of $366 million compared to its profit of $849 million for the same period a year ago.

In a search for change, the company replaced its chief financial officer in March. At that time, chief executive Ed Zander blamed the problems on dropping prices for low-end cell phones, and Motorola's decision to give up market share instead of entering a price war with competing vendors.

Motorola says it will finish making the 3500 job cuts it had perviously announced by June 30, contributing to an estimated $400 million in annual savings. The restructuring will also incur its own costs. Motorola will subtract a one-time charge of $300 million from its savings, to pay for severance packages and other costs of the workforce reductions.

"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," Motorola's chief financial officer Tom Meredith said in a release.

Meredith promised the cuts would not distract Motorola from keeping its focus on long-term plans in customer service and support, product quality and research and development.


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