Handsets continue to drag Moto down

Motorola’s handset division continues to be something of an albatross around the company’s neck, as chief executive Ed Zander cut first quarter revenue projections by over $1bn on Wednesday night.

Motorola downwardly revised its first quarter guidance from between $10.4bn and $10.6bn to between $9.2bn and 9.3bn, prompted by lower than anticipated sales and operating earnings at the Mobile Devices business.

“Performance in our Mobile Devices business continues to be unacceptable, and we are committed to restoring its profitability,” said Zander. “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.”

Investors will not be pleased at the news, which follows a 48 per cent slump in fourth quarter profits, also dragged down by the handset unit.

The company has already pledged to cut 3,500 jobs in a bid to save $400m over the next two years.

Zander blamed lower overall unit volumes, a difficult pricing environment, particularly for low tier products and a limited 3G product portfolio for the handset unit’s shortcomings.

Despite having won the GSM Association’s two tenders for emerging markets handset production, Motorola complained that its competitors lowered prices at a faster rate than anticipated in these markets, particularly India, Africa and South Asia and the company chose not to match prices in all instances.

The company expects the Mobile Devices business to incur an operating loss in the first quarter and to experience a gradual recovery in the second half and be profitable for the full year.

In an effort to turn its handset fortunes around, Motorola will deploy open standards Linux and Java software across mid and high tier devices; will shift its marketing approach to include experience as well as design as a product value proposition; will simplify its platform and product portfolio while transitioning out of legacy platforms; and will improve product design processes to achieve competitive price points.

In other news, Motorola also announced that Greg Brown, president of the company’s Networks and Enterprise business has been named president and chief operating officer and will be responsible for overseeing Motorola’s Mobile Devices, Networks and Enterprise, Connected Home Solutions businesses and supply chain operations.