Motorola stock sinks on profit warning
Schaumburg-based Motorola Inc. said Wednesday its fourth-quarter profits plunged 84 percent and next quarter could be worse, news that sent its stock into a free fall.
Motorola Chief Executive Officer Greg Brown told Wall Street analysts he is not satisfied with the company's performance, warned that the next quarter likely will have deeper losses and vowed to continue restructuring.
He plans to cut an additional $500 million, which could include jobs and other "activities" from its mobile devices business, Brown said in an interview.
Brown declined to say how many layoffs or plant closings might be in the works. "Just say the emphasis will be on the mobile devices business and its activities," Brown said.
The wireless phone division posted a 38 percent sales loss and even showed sluggish sales during November and December, the holiday shopping season.
Motorola had a worldwide work force of about 65,000 in December, down from 72,000 after acquisitions of Symbol and other smaller companies. Brown said he expects the mobile devices division headquarters to remain in Libertyville.
While the phone portfolio has waned since the ultra-thin Razr debuted, Brown promised to offer new products in a multimedia 3G line, which had been sidelined for too long, Brown said.
"We have struggled in that area and see that as an opportunity for us to pursue," said Brown.
On Jan. 1, Brown replaced Ed Zander, who resigned as CEO after four years. Zander will remain on the board through May. The communications company saw hope when Zander took over in 2004 but after the Razr hit its peak, sales and worldwide market share began falling.
"I have watched Greg Brown since his days at Ameritech in the 1990s. He has a good understanding of the issues Motorola faces," said independent telecom analyst Jeff Kagan of Atlanta. "This is a good move on Motorola's part, but it will be a while before we know whether Greg Brown can resuscitate the company."
Between the bleak fourth quarter, year-end results and even bleaker forecast for the first quarter of this year, Motorola's stock dived. Shares fell 23 percent in mid-day trading Wednesday, to the lowest level in more than five years. The stock closed at $10.01, down $2.31, or nearly 19 percent.
"The stock is likely dead-money until we see progress on the handset front," said Mark McKechnie, telecom analyst with American Technology Research.
The balance sheet showed fourth-quarter net earnings were $100 million, compared to $623 million in the same period a year ago. Fourth-quarter sales were $9.6 billion, or 4 cents a share, down from $11.8 billion, or 25 cents a share, in the same period a year ago.
For the full year of 2007, Motorola's net loss was $49 million, compared to a profit of $3.6 billion in 2006. Sales for 2007 were $36.6 billion, compared to $42.8 billion in 2006.
While the mobile devices business dropped, the home and networks mobility business sales were up 11 percent and enterprise mobility solutions business sales were up 35 percent.