Wifi Revolution

As competition intensifies, the future prospects of Motorola’s (News - Alert) mobile phone market are looking thinner than its thinnest phones. Blaming it all in the weaker than expected mobile phone sales, Motorola replaced its chief financial officer and cut its first-quarter sales forecast. According to Motorola’s chairman and CEO Ed Zander, the performance of Motorola’s mobile device business is “unacceptable” and the company is expected to report a first-quarter loss very soon.

 

Thomas Meredith will replace the retiring David Devonshire as the acting chief financial officer. Greg Brown, who is currently the president of the company's networks and enterprise business, will be the new president and chief operating officer. These surprise announcements came just after the resignation of the head of the handset business a month ago. Industry experts believe that this is the sign of a deeper turmoil within the ranks of Motorola.

 

Earlier, Motorola had predicted a sale worth $10.4 billion (euro7.82 billion) to $10.6 billion (euro7.97 billion) for the period January through March quarter. It has now scaled down the predictions by approximately $1 billion (euro0.75 billion) and the current predictions stand at $9.2 billion (euro6.92 billion) to $9.3 billion (euro7 billion). While the analysts surveyed by Thomson Financial forecasted a 17-cent profit on the Motorola shares, the company forecasted that there will be loss of 7 cents to 9 cents per share, including 9 cents per share in charges.

 

After terming the performance of the mobile business unit as “unacceptable,” Motorola is now gradually realizing that restoring the profitability of the mobile business unit will take much more than just changing top level leadership. It will instead also take huge effort and a longer time to return to profitability as rivals like Samsung (News - Alert) and Nokia are continuously raising the bar. To Motorola’s credit, it’s not having any unrealistic expectations and expects that sales, profitability and operating cash flow for the full year will be "substantially" below its prior guidance.

 

One of the major reasons for a decline in sales for Motorola mobile sets is the company’s unwillingness to cut the prices of the low end models-- something its competitors did. But the company officials feel that this decision will prove to be right in the long run. To arrest the increasing losses and restore profitability, Motorola is taking many new measures such as reshuffling the management, buying back more of its lagging stock, accelerating $2 billion (euro1.5 billion) of share repurchases and increasing the size of its current share repurchase program to $7.5 billion (euro5.6 billion).

 

This has not been a very encouraging quarter for mobile phone giants like Motorola and BenQ. In the last two years, Motorola had witnessed a meteoric rise in the sale of its mobile phones thanks to the immensely popular Razr phones. This had forced even the number one manufacturers like Nokia (News - Alert) to alter their strategies and come up with slim phones. As the future looked rosy and bright for Motorola, the company stunned the market by disclosing a steep drop in profitability in the handset division that resulted in its least profitable quarter since 2004.

 

 

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