-Motorola ($14-$14.40) to cut 7,000 jobs, take $3.5 bln charges
(Adds closing stock action)
By Ben Klayman and Yukari Iwatani
CHICAGO, June 27 (Reuters) - Motorola Inc. <MOT.N> said on
Thursday it will cut 7,000 more jobs and take charges totaling
about $3.5 billion, essentially ending its massive downsizing,
as it contends with sharply reduced spending in the depressed
technology and telecommunications sectors.
Since August 2000, the chipmaker and world's second largest
mobile phone maker has slashed its work force by more than
one-third from its peak level of 150,000.
"What we're doing here is taking the company back to about
its 1995 size, before the era of the excesses of the dot-com
and telecom booms," Motorola Chairman and Chief Executive
Christopher Galvin told analysts on a conference call.
Motorola's stock closed up 41 cents, or almost 3 percent,
at $14.45 in Thursday trading on the New York Stock Exchange.
It has declined almost 4 percent since the first of the year,
compared with a 48.8 percent drop in the industry proxy
Standard & Poor's telecommunications equipment index <.GSPCOMM>
in the same period.
The company said the charges, to be taken mostly in the
second quarter, will reduce this year's net income by $1.10 a
share, but it still sees a profit before special charges of at
least 4 cents a share. Motorola posted a net loss of $1.78 a
share last year. It said 2002 sales could decline by as much as
10 percent from last year.
Analysts said the charges and job cuts were bigger than
expected. "It's marginally positive because it talks about
bigger cost cuts than we'd expected," J.P. Morgan analyst Ed
Snyder said.
The latest cuts will reduce employment by 7 percent from
the previous target to 93,000, hitting all of its businesses
and its corporate headquarters. Motorola said in March it
intended to reduce the total to 100,000 from 107,000 employees
by year-end.
Motorola President Ed Breen said the restructuring will be
"substantially completed" after these actions.
FOCUS ON SEMICONDUCTORS
Analysts said the latest actions would help the company
return to profitability after losing $3.9 billion last year
after one-time items. Motorola previously said it would take a
large charge to finish its restructuring.
J.P. Morgan's Snyder said the latest actions would likely
target the money-losing semiconductor business. Motorola said
Wednesday it would shift more of that unit's work to contract
manufacturer Taiwan Semiconductor Manufacturing Co. Ltd.
<2330.TW>.
He was disappointed the company did not address plans for
its money-losing wireless infrastructure business, which makes
equipment for wireless carriers.
"Infrastructure has continued to be in a way a noose around
Motorola's neck," said Jane Zweig, CEO of wireless consulting
firm The Shosteck Group. "They're trying to sensibly figure out
what to do with it."
Motorola said last month it wanted to find a partner for
that business. On Thursday, it said about 3,000 of the latest
cuts would come from that unit.
Galvin said near-term growth would be moderate due to the
weak overall market. "The investment era of the late 1990s
won't repeat itself perhaps in our working lifetimes because so
many of the highly touted business models probably didn't exist
to begin with," he said.
Excluding charges, Motorola reaffirmed its operating
earnings forecasts for the second quarter and full year, and
said it expects to make a profit in the third and fourth
quarters.
Motorola said it is confident it will meet or slightly beat
its expectations of a second-quarter loss of 4 cents a share,
excluding special items, and will meet or slightly exceed its
expectations for $6.4 billion in sales. It is scheduled to
report those results July 16.
The company said it had made payments under its prior
restructuring actions and paid a significant escrow deposit for
litigation related to Iridium, its failed satellite-phone
company. Including those cash payments, totaling more than $500
million, Motorola still expects positive operating cash flow in
the second quarter.
Motorola still expects a full-year profit of at least 4
cents a share, excluding special items, with sales declining by
5 percent to 10 percent from $29.5 billion last year.
Among the charges, Motorola said about $1.9 billion will be
for restructuring, including the new job cuts. Another $1.1
billion will be to lower market valuations of investments and
other assets, the largest of that related to its 15 percent
stake in wireless provider Nextel Communications Inc. <NXTL.O>
The company also said it will write off $530 million in
long-term financing receivables, including the remainder of a
loan to Turkish cellular service operator Telsim, which remains
in default. Motorola, along with bigger rival Nokia <NOK1V.HE>
<NOK.N> of Finland, has sued Telsim in U.S. federal court,
seeking to recover its original $2 billion loan.
The rest of the charges are expected to be taken in the
third and fourth quarters, the company said, adding that less
than 20 percent of the total charges will be "cash-related."
Motorola said the latest actions will save $100 million for
the rest of the year and $700 million annually before taxes
afterward. It expects to end the second quarter with about $6
billion in cash and equivalents and $1.5 billion in short-term
debt, including $500 million in commercial paper.
((--Chicago Equities News at 312 408 8787,
chicago.equities.newsroom@reuters.com))
REUTERS
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