Motorola makes more moves to cut costs

Struggling with slow demand for handsets, Motorola announced plans to reduce its workforce by 7,000 people during the next two quarters.

This brings total reductions in the personal communications sector to 12,000 since December. Motorola said it will take a charge against first- and second-quarter earnings.

Motorola’s cutbacks are part of the company’s cost-reduction plans, which include outsourcing handsets, reducing its handset portfolio and closing certain manufacturing facilities. Motorola’s fourth-quarter earnings fell 58% compared with the previous year. The company has warned it likely will earn less than the expected 12 cents per share during the current quarter.

“This is yet more stark evidence that the historic supply-side economics that characterized the mobile-phone industry for years are now gone forever,” said Bryan Prohm, handset analyst with Gartner/Dataquest. “The rising tide no longer lifts all boats.”

Yesterday, Ericsson said it expects sales for the quarter to be flat or somewhat lower compared to the first quarter of 2000, rather than originally projected increase of 15%. Income before tax is expected to be between negative $405 million and negative $506 million.

Ericsson President and CEO Kurt Hellstrom said the economic slowdown, particularly in the U.S., is the cause of the expected shortfall.