Motorola replaces CFO, slashes outlook

Motorola replaces CFO, slashes outlook

	Published : Wed, 21 Mar 2007 23:38 By : Agencies Print this Story

CHICAGO (AP) - Motorola Inc. replaced its chief financial officer Wednesday in a shakeup of top management as it slashed its first-quarter sales forecast, blaming weaker-than-expected revenue from its cell-phone unit.

Still reeling from sales and profit problems that emerged in the fourth quarter, the company said it now expects to report a first-quarter loss because of what Chairman and Chief Executive Ed Zander called an 'unacceptable' performance by its mobile device business.

The world's No. 2 cell-phone maker behind Nokia said it now expects sales for the January-through-March quarter of $9.2 billion to $9.3 billion, down more than $1 billion from its January forecast of $10.4 billion to $10.6 billion.

It said it expects to report a loss of 7 cents to 9 cents per share, including 9 cents per share in charges. That compares with the 17-cent profit forecast by analysts surveyed by Thomson Financial.

The company said it expects sales, profitability and operating cash flow for the full year to be 'substantially' below its prior guidance.

Thomas Meredith, 56, was named acting chief financial officer, effective April 1. He replaces David Devonshire, 61, who will retire from the position. Zander also named Greg Brown, president of the company's networks and enterprise business, to the vacant posts of president and chief operating officer.

The surprise announcement after markets closed reflected even deeper turmoil within the Schaumburg, Ill.-based company just a month after the head of its embattled handset business resigned.

Motorola shares tumbled 5.9 percent, to $17.63, in extended-hours trading after closing the New York Stock Exchange session down 8 cents at $18.74. The stock has shed 9 percent this year after a 9 percent decline in 2006.

'Performance in our mobile devices business continues to be unacceptable, and we are committed to restoring its profitability,' Zander said. '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.'

Besides reshuffling top management, Motorola said it will buy back more of its lagging stock, accelerating $2 billion of share repurchases and increasing the size of its current share repurchase program to $7.5 billion.

Motorola said the cell-phone unit, its largest, likely will report an operating loss in the first quarter due to slower unit volumes, a difficult pricing environment and a limited 3G product portfolio that is keeping its results in Europe below expectations.

The company, which had been coming off a nearly two-year period of nearly unprecedented gains because of the popularity of the Razr phone, stunned Wall Street in January by disclosing a steep drop in profitability in the handset division that led to its least profitable quarter since 2004.

It said it was cutting 3,500 jobs and taking other steps to reduce costs following misjudgments on pricing and sales forecasts for its high-end phones.

Zander said on a conference call late Wednesday that he was dissatisfied with the pace of restructuring steps taken since the departure of Ron Garriques as head of the mobile devices business on Feb. 16, citing delays and other problems.

He maintained that the business should experience a gradual recovery in the second half and be profitable for the full year.