Motorola Lowers Sales Expectations, Shakes Up Management

The loss included acquisition charges related to the purchases of Symbol Technologies, Good Technology, and Netopia.
Motorola on Wednesday lowered its sales projections by $1 billion for the first quarter because of an unexpected drop in mobile-phone sales, a setback that also led the company to announce an executive shakeup.

The world's second-largest handset maker said CFO David Devonshire would retire and be replaced April 1 by board member Thomas J. Meredith, who would be acting CFO. In addition, Greg Brown, president of the company's networks and enterprise business, was named president and chief operating officer of Motorola, effective immediately.

"Performance in our mobile devices business continues to be unacceptable, and we are committed to restoring its profitability," Edward J. Zander, chairman and CEO of Motorola, said in a statement. "After a further review following the leadership change in our mobile devices business, we now recognize that returning the business to acceptable performance will take more time and greater effort."

The Schaumburg, Ill., company lowered its sales projects for the first quarter to the range of $9.2 billion to $9.3 billion. Motorola had previously forecast sales of between $10.4 billion and $10.6 billion. Based on generally accepted accounting principles, or GAAP, the company expected to report a loss in the range of 7 to 9 cents a share. The loss included acquisition charges related to the purchases of Symbol Technologies, Good Technology, and Netopia. It also included charges from the layoffs of 3,500 workers.

The revised projection, however, was attributed to lower-than-expected sales and operating earnings in its handset business. The financial problems stemmed from pricing competition, particularly in low end of the market, and a lagging product line in the market for advanced cellular phones that operate on carriers' high-speed networks. Motorola expected its mobile phone business to report an operating loss for the first quarter. The company is scheduled to release quarterly results April 18.

For the full year, Motorola expected overall sales, profitability, and operating cash flow to be "substantially below prior guidance." The company expected to be profitable for the year and to generate positive operating cash flow. The handset division was forecast to recover in the second half of the year and to be profitable for the full year.

In revising its forecast, the company also said it would increase its 36-month stock buyback program that began in July to $7.5 billion of common stock from $4.5 billion.

In announcing the retirement of Devonshire, 61, the company said he would continue with Motorola after April 1 to ensure a smooth transition. In thanking Devonshire for his years of service, Zander said. "I appreciate his commitment to ensuring a seamless transition."

Meredith, 56, is a general partner of investment management firm Meritage Capital, which he co-founded. He is also CEO of MFI Capital.

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