The US telecoms equipment firm will also make a loss in Q1 2002. However, the news is better than it looks. The mobile handsets unit, which had been struggling, is doing significantly better. The infrastructure unit is still a cause for concern and the semiconductor business seems to be a considerable liability, but Motorola’s overall position seems relatively optimistic.
Motorola has issued a warning about 2002 sales and announced plans to cut another 9400 jobs.
On Tuesday night, US telecommunications equipment maker, Motorola, warned that it expected a 10% decline in sales next year. It also announced a new round of 9,400 job cuts and warned on earnings for Q1 2002, although it still expects to meet its Q4 2001 estimates.
Motorola, which has already shed over 35,000 employees since summer 2000 as part of a major restructuring program, said that Q4 results in its commercial/government systems and mobile handset divisions would be better than expected. Telecom solutions and broadband equipment would come in below estimates, though.
The semiconductor unit continues to do just as badly as estimated. Out of the latest job cuts, 4,000 will be in this sector. The commoditized semiconductor manufacturing market, low-margin at the best of times, is also suffering the effects of the downturn. As many commentators have suggested, Motorola might do well to leave this sector.
Declining equipment sales, which the company expects will continue into well next year, accounting for most of the total fall, are not a new phenomenon. In the broadband market, providers are running progressively into worse financial trouble and they simply can’t buy equipment. This trend has been continuing for a year, and still shows little sign of reversing.
However, the news from mobile handsets is reassuring. Motorola has recently restructured this business to focus on delivering the latest technology (it was first to market with a GPRS handset) and on providing the product ranges that are more attractive to the consumer. According to the latest statement, it has successfully raised margins without losing significant market share.
The telecommunications business seems to be the way forward for Motorola. The stronger handset division should also have knock-on effects in selling infrastructure, applications and services. Next year will be difficult, but if the company improves its position in 3G infrastructure and handsets, the future could be bright.