Motorola reports management shakeup, disappointing sales

Sales revised downward by $1B in Q1

Disappointing handset sales forced Motorola Inc. to lower its revenue forecast today and to announce two new top managers.

"Performance in our mobile devices business continues to be unacceptable, and we are committed to restoring its profitability," said CEO Edward Zander in a conference call. "Returning the business to acceptable performance will take more time and greater effort."

Greg Brown was named president and chief operating officer effective immediately, and Thomas Meredith was named acting chief financial officer, to replace David Devonshire, who will retire, according to a statement from the company.

Brown, 46, joined Motorola in 2003 after serving as CEO of Micromuse Inc., a network management software company. He has been president of the networks and enterprise business, with revenue of $13 billion annually, and will now be responsible for Motorola's mobile devices, networks and enterprise and connected home solutions businesses, the statement said.

The company said sales for the first quarter have been revised to $9.2 billion to $9.3 billion, more than $1 billion below an earlier forecast. A loss of 7 cents to 9 cents a share is also anticipated. Motorola is also speeding up a repurchase of $2 billion in common stock and increasing the size of the current share repurchase to $7.5 billion.

The revisions are attributed to lower-than-expected sales and operating earnings in the mobile devices business due to lower overall unit volumes; a difficult pricing environment, particularly for low-tier products; and a limited 3G product portfolio. An operating loss for mobile devices is predicted in the first quarter, with results expected to be announced April 18. However, a gradual recovery is predicted later in the year. Networks and enterprise and connected home solutions businesses will be positive, the company said.

In the conference call, Brown said that lagging sales in high-end 3G handsets in Europe especially hurt Motorola, and he reiterated the need to develop in the 3G area.

Other strategies described by Zander to bolster handset sales include using open standards Linux and Java software across mid- and high-tier devices, accelerating a strategy for using more cost-competitive silicon chips, introducing new feature rich products, and simplifying the platform and product portfolio.

Zander also said he is canceling his keynote address at the CTIA conference next week because of family considerations, not because of business matters.

Copyright © 2007 IDG Communications, Inc.

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