Fourth quarter fails to stir Motorola

Mobile handset industry's number two vendor vows to slash workforce to rein in costs.

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By  Aaron Greenwood Published  January 25, 2007

After a stellar first half in 2006, the industry’s number two vendor, Motorola, fell flat in the final quarter of the year, attributing an inconsistent product mix to its inability to meet profit and sales expectations. Having issued an ominous profit warning in December, the company’s final results for the quarter did little to soften the initial blow. While total net sales were up 17% for the quarter year-on-year to US$11.79 billion, net earnings were slashed by half to US$624 million. The company’s performance in the final quarter also impacted full year sales results, with net earnings down 20% to US$3.66 billion. According to a company statement, the shortfall in both sales and earnings was the result of “an unfavourable geographical and product-tier mix of sales”, as compared to the company’s internal forecast. While Motorola reported Mobile Devices unit sales reached US$7.8 billion – up 19% compared to a year previously – operating earnings for the period fell from US$663 million to US$341 million. At the time of press, Motorola chairman and chief executive Ed Zander announced the company would slash 3,500 jobs worldwide and rein in costs in a bid to stave off competitive threats to its position as the industry’s number two vendor. Zander said the strategy aimed to save the company US$400 million over two years. It remained unclear at the time of press whether the job cuts would impact Motorola’s Middle East and Africa operation. “We are very disappointed with our fourth-quarter financial performance,” said Zander. “But we remain committed to the strategic direction and long-term financial targets we discussed at our annual analysts meeting in July, 2006. We will announce further plans to improve operating profitability this month.” Meanwhile, the company unveiled the latest addition to its second-generation MotoMusic range of handsets at CES 2007, which was recently staged in Las Vegas. Built on Motorola's new Linux-Java software platform, the Motorizr Z6 is the first Motorola handset to include Microsoft Windows Media technologies such as Windows Media Digital Rights Management (DRM), Windows Media Audio (WMA) and Media Transfer Protocol (MTP), as standard. The slider-style handset offers simple connectivity to Windows-based PCs via the USB 2.0 high-speed protocol. By supporting MTP, Windows Media Player automatically recognises the Motorizr Z6, letting users quickly and easily sync from the PC to the handset music purchased from more than 200 online music stores. "The Z6 is the world's first Linux-Java music phone integrating the full suite of Windows Media technologies," claimed Scott Durchslag, corporate VP of Product and Xperience Invention at Motorola Mobile Devices. "It enables consumers to access whatever music content they want, from a music store of their choice." Durchslag said Motorola also planned to collaborate with Microsoft to develop MotoMusic handset offerings that can download music via a 3G network.

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