Ron May is the publisher of "The May Report," a Chicago centric technology newsletter distributed by email. His sources, particularly when it comes to MOT, are generally very very good.
Massive layoffs of 7,500 officially and 10,000 unofficially imminent at Motorola
by Ron May
I have a quick and short but an important report. The morale at Motorola right now, my sources say, is dismal, as everyone awaits a big announcement of massive lay-offs. The official number is going to be 7,500, I am hearing from the inside, but the real number may be as high as 10,000 or more. We will then be talking about a staff of under 60,000 employees. They are already down below 65,000.
Motorola will have to make this announcement in the next few days because of European rules that they give a 30 day before the end of the quarter notice. So, the announcement should be coming out in the next few days.
The cuts will probably be in all areas, I am hearing and there is not much left to cut. They are already at the bone, I was told.
This knowledge is widespread inside the firm, but it has not been reported in the general media yet, which is why I am in a hurry to get this out.
The only way they can pull this off, my sources are telling me, is to sell off or spin off one of the operating groups. An across the board cut may not work, some people are thinking. Motorola may have to sell off a division.
One thing is certain: the cuts will be draconian.
Motorola is under great pressure from the analysts to cut staff.
Some people have told me that this is a "death rattle." You don't drive a firm to global success this way.
Also, the market reaction to the new RAZR2 is lukewarm at best. It has been introduced in Europe already and Motorola is already over-promoting it as the next big win. Sales have been mediocre and RAZR2 will be available in the United States starting in July.
The company is paralyzed while people wait to see if their number is up. Everyone is just sitting and waiting, I was told. This is comparable to when Motorola missed the boat on cell phones going to digital from analogue.
CEO Ed Zander does not come across well here because he has been completely consumed by the cell phone business and Wall Street is also consumed by it. Set top boxes, networks and the wired home plus next generation technology is where Motorola should be placing its efforts, my sources are saying.
Even an unsophisticated observer like Ron May can see that. When I attended the IFOPE conference a month ago, Dan Gamota spoke and the stuff he was talking about there was cutting edge, but that is by no means the preponderance of Motorola's business. His group has about 20 people and the larger research lab Dan works in under Dr. Iwona Turlik has about 100.
Motorola is trying to become a consumer products company and that push has been unsuccessful. Their global leadership used to be based on their technology leadership.
As one person put it to me, "this is the price they are paying for their quixotic pursuit of brand new billion dollar markets that nobody else sees as opposed to launching new businesses in emerging markets and growing them to scale over time."
BTW, whatever happened to Jim Wicks and his product introduction map?
Lastly, here are some notes I took from my tape of people I interviewed after the shareholder meeting on May 7th. I know it seems today like eons ago and it was only twenty three days ago.
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This is from one sharenholder who took extensive notes:
There were angry shareholders from China and the Netherland who got up to speak at the meeting. They mentioned Deutsche Telecom.
Jesse Jackson asked where the Chinese, Brazilian and Indian board members are. Recall that the CEO of Pepsi, Indra Nooyi, an Indian woman left the board and she may have been the only woman on the board.
One guy from Cincinnati asked about shareholder rights, and another shareholder asked where the dividends are.
One guy who is retired and had been at Motorola for 42 years wanted someone else to answer, not Ed Zander.
You had to send in a proxy to get a ticket.
The guy with the extensive notes whom I was talking to and who did not want to use his name had shares for 8 or 9 years.
What was the toughest question Zander was asked?, I asked one person. It was probably when he responded to Carl Icahn about the board and Carl's criticism that the board is not qualified.
One person told me that his impression of meeting was that it was "orderly."
How did Zander handle it? "He had to be politically correct," one guy told me.
A Motorola employee and shareholder told me that Ed Zander restated the future as a positive one. This person was very skeptical of someone who just gets value out of stock, and he was obviously referring to Icahn.
"We have consolidated businesses, added value to our customers in terms of public safety," this person said. He also told me that Greg Brown who has been promoted now, "does everything right, solid answer to solid question, no funny business." I had asked this guy about how the "Bell Head" Greg Brown is perceived.
Someone mentioned the Columbia, South American operation.
Clark Wells owns a lot of stock, 20,000 shares bought at $33 and it had just split three for one in 2000. He told me that he was "hoping that Icahn would get in, I voted for him." Meanwhile he complained that Motorola employees "don't have to work hard, they get their shares free"
Mr. Wells added, "I am kind of disgusted with them. I should have dumped it at $26. I sold some at $18. I got piggy and I hoped it would go higher."
Another person I talked to, an employee, has been a shareholder for 26 years and he is a sales representative at Motorola.
Icahn told the audience that he thinks he will not get on board. It will take three weeks to know.
The whole meeting was on the internet. The room was overflowed.
I talked to Martin Glotzer.
One woman I talked to told me that "Motorola is a great engineering company that has lousy marketing."
She said that Reverend Jackson wants to shake up the board, and the one woman from India just left.
One guy told me that "Icahn was well spoken until I heard Ed Zander, but I don't know if the figures he was throwing out were true, he said that the stock has doubled in the last three years."
This person bought the stock 15 years ago.
A former Motorola employee said that the meeting was more exciting than the last one because of Icahn, but his speech was a bit irregular, and he rambled once in a while. Icahn is 69 years old. (Is that correct?)
Finally, after all the work I did on that MediaRiver article, I left out the hiring of Cathy Kearney who is the new VP of Finance and Administration. She used to be at Centerpost. Ironically, in a report on Motorola, remember that Centerpost has a Motorola connection.
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