Motorola
North Americas largest maker of telecommunications equipment posted a massive fourth-quarter loss as it recorded charges to reflect the shrinking value of its cell phone business. It also suspended its dividend, said its chief financial officer had left and gave a disappointing forecast for the current quarter.
Its stock tumbled as much as 15 percent.
Motorola made the first commercial cell phones in the U.S., and a few years ago had a huge hit with the Razr phone. But as fickle buyers have moved on, Motorolas fortunes have dwindled dramatically, with its cell phone revenue dropping 70 percent in two years. The company has been unable to cut costs to keep pace.
Last year, the company hatched a plan to spin off Mobile Devices, its cell phone business, and recruited a “co-chief executive” to run the business until then. But the persistent losses caused it to postpone the spin-off.
Citigroup analyst Jim Suva voiced investors frustration on a conference call Tuesday, asking Motorolas co-CEOs whether they would consider simply shutting down Mobile Devices. Motorolas two other main divisions are making money.
“Theres a tremendous amount of work left to do there,” said Sanjay Jha, who recently was brought in from Qualcomm Inc. to head the unit. “But we are absolutely committed to turning that business around because we believe thats a very good place to put money to create shareholder value.”
Motorola lost $3.6 billion, or $1.57 per share, in the fourth quarter.
Excluding charges it took for goodwill impairment and an increase in its deferred tax reserves, the Schaumburg, Ill.-based company lost 1 cent per share. Analysts polled by Thomson Reuters expected Motorola to break even on that basis.
In the same quarter of 2007, Motorola earned $100 million, or 5 cents per share.
Motorolas sales in the fourth quarter were $7.14 billion, down 26 percent from the year-ago period.
Motorola gave no specific reason for the departure of CFO Paul Liska, who was appointed last February, but co-CEO Greg Brown implied that it was connected to the delay of the phone spin-off. He praised Liska for the work he did to prepare for it, but said changes in the “business environment” made a change at the CFO post appropriate as well.
Edward J. Fitzpatrick, senior vice president and corporate controller, will be acting CFO while the company searches for a permanent replacement.
Motorola is on a mission to cut costs by $1.5 billion this year, mainly from the cell phone division. It announced 4,000 job cuts in January, in addition to 3,000 in October.
Even with those efforts, Motorola forecasts a loss of 10 to 12 cents per share for the current quarter, excluding charges. Analysts had been expecting a loss of 6 cents per share.
“Something is going on - the guidance is much worse than expected, which seems to imply that actions theyre taking are not enough in the short term,” said analyst Pablo Perez-Fernandez at Global Crown Capital.
The elimination of the dividend is a sign of the companys need to conserve cash. Motorola most recently paid a 5 cent quarterly dividend, for an annual yield of about 4.4 percent. It paid out $453 million in dividends last year.
“Dwindling cash reserves … are going to tie the companys hands down in its ability to restructure effectively,” Perez-Fernandez said. “We need clear indications from Motorola what it is going to do to turn around the company.”