Jun 28, 2002 4 min read

By Bennie M. Currie Associated Press Writer

CHICAGO (AP) – Motorola Inc. announced plans Thursday to trim another 7,000 jobs, or 7 percent of its work force, in the latest in a series of cost-cutting actions that it said virtually completes its massive two-year restructuring.

The cell-phone and semiconductor giant said it remains on track to return to operating profitability in the second half of the year.

As part of the restructuring, the company has reduced its work force from a peak of 150,000 employees in August 2000 to the roughly 100,000 people. The latest cuts will put Motorola’s work force at around 93,000, said spokesman Scott Wyman.

“This comprehensive restructuring purposefully returns Motorola to approximately its mid-1990s size, the era prior to the excesses of the telecom and dot-com booms,” said Christopher Galvin, Motorola’s chairman and chief executive officer.

Motorola said the charges associated with its latest restructuring will be about $3.5 billion, with about 90 percent of it expected to occur in the current quarter and the rest to follow in the second half of the year.

Shares in the Schaumburg, Ill.-based company were up 22 cents at $14.26 in afternoon trading on the New York Stock Exchange.

The company in a statement said the new cuts will affect all business segments and corporate headquarters operations. It is part of an effort to lower expenses in a number of areas, including manufacturing, sales and research and development.

About 3,000 of the job cuts will come from Motorola’s wireless infrastructure business, Wyman said. Wireless is Motorola’s third-biggest business behind cell phones and semiconductors, with most of its operations in North America, followed by Europe and Asia.

The company declined to discuss which regions of the United States would be affected by the layoffs.

About $1.9 billion of the charges are tied to the work force reductions and a plan to write down some of its semiconductor plants to fair-market value, the company said. Another $1.1 billion in charges is tied to its plan to lower market valuations of investments and other assets, officials said.

The company also plans to write off $530 million in long-term financing related to a loan to Turkish cellular service operator Telsim, which remains in default.

Less than 20 percent of the restructuring-related charges are expected to be cash-related.

Ed Breen, Motorola’s president and chief operating officer, said the costs do not reflect poorly on the company’s recovery effort. “The restructuring will be substantially completed when the steps we are announcing are fully implemented,” he said.

The company reaffirmed its second-quarter earnings projection, saying it expects to meet or be slightly better than a loss of 4 cents per share. The consensus forecast of analysts surveyed by Thomson Financial/First Call is for a loss of 4 cents a share.

Motorola also said it still expects to show an operating profit in the third and fourth quarters this year, excluding charges. The company reports second-quarter earnings in mid-July.

Galvin said the company intends to grow at a modest pace, helped by a series of new products. He said it will focus on the “fundamental needs of the global society,” with products such as two-way radio systems for public safety, cellular handsets and systems to deliver digital video, voice and high-speed data solutions to the home.

But some analysts remain skeptical that Motorola will be able to reach its growth targets in the remainder of the year amid weak market conditions.

“The fact is Motorola is a conglomerate of many disparate businesses that are mediocre at best,” said Todd Bernier of Morningstar. “Every one of their businesses is suffering and all signs point in the same direction, that the company will continue to struggle with growth. I think the ratings agencies agree.”

Two weeks ago, Standard & Poor’s downgraded Motorola’s corporate credit rating to two notches above junk status.