Troubled Moto cuts revenue forecast

22-03-2007

by Charlie Taylor

In a sure sign that all is not well at Motorola, the firm has replaced its CFO, reduced its revenue forecast and warned that it will post a first-quarter loss.

The mobile manufacturer said on Wednesday that it now expects sales for the first quarter of 2007 to be in the range of USD9.2 billion to USD9.3 billion. This is down from its January forecast of USD10.4 billion to USD10.6 billion. In addition, Motorola said it was predicting a loss in the range of USD0.07 to USD0.09 per share.

The company attributed the expected first quarter loss to weaker-than-expected sales of mobile devices and said it was taking steps to strengthen its performance through the appointment of Thomas Meredith to acting chief financial officer (CFO), where he replaces David Devonshire, who is to retire. Motorola also announced that it was appointing Greg Brown as president and chief operating officer (COO) with immediate effect.

"Performance in our Mobile Devices business continues to be unacceptable, and we are committed to restoring its profitability," said Edward J. Zander, chairman and chief executive officer of Motorola.

"After a further review following the leadership change in our Mobile Devices business, we now recognise that returning the business to acceptable performance will take more time and greater effort," he added.

In addition to making a number of new appointments, Motorola said it intends to accelerate USD2 billion of share repurchases and increase the size of its current share repurchase program to USD7.5 billion.

The Illinois-based company also offered a revised full-year forecast and said that it currently expects overall sales, profitability and operating cash flow to be "substantially below prior guidance."

However, while the company does expect its Mobile Devices business to incur an operating loss in the first quarter, it believes it will make a gradual recovery in the second half of the year and be profitable for the full year.

"The steps we are announcing today will enable Motorola to perform better for our shareholders, customers, partners and employees. I am confident Motorola has the right assets, brand and intellectual property, as well as a strong heritage of innovation and a strong balance sheet -- all of which we will draw upon in the coming months," concluded Zander.

The latest forecast from Motorola follows the firm's shocking announcement in January in which it reported a dramatic fall in profits for its fourth quarter. The firm said that profits tumbled by 48 percent year-on-year to USD624 million down from USD1.2 billion the previous year.

More recently the company announced that it had entered into an employee consultation process which will lead to the loss of 330 jobs at its facility in Mahon, Co Cork by May.