Motorola eyes phone weakness, job cuts; delays spinoff

By Sinead Carew

NEW YORK (Reuters) - Motorola Inc warned its fourth-quarter results would miss expectations and said its struggling mobile phone business would weaken further in 2009, forcing the company to delay its plan to spin off the unit and cut 3,000 jobs.

Shares of Motorola fell by as much as 8 percent, even as Co-Chief Executive Sanjay Jha announced cost cutting plans and a focus on fewer cell phone technologies.

"The reality is there is no quick fix here," the newly hired Jha, who also heads Motorola's mobile devices division, told analysts on a conference call.

He forecast a decline in fourth quarter phone sales and a widening loss due to a limited line-up of both cheap and advanced phones, the strongest growth segments. Jha warned that declines would continue in the first half of 2009, grim news for a company that has already been struggling for two years.

Jha outlined a plan to save $800 million in costs in 2009, by cutting 3,000 jobs, or 4.5 percent of the company's workforce, and narrowing Motorola's focus to its strongest regions such as North America.

Analysts approved of the plan but questioned if it was too late for the company, which ceded its third place in the mobile phone market to Sony Ericsson in the quarter. It had lost second place to Samsung Electronics in 2007.

"Near term, the situation in mobile devices may deteriorate further as Motorola is sorely lacking a compelling product portfolio in entry level and smartphones," said RBC Capital analyst Mark Sue.

Motorola said it was no longer targeting the third quarter of 2009 for spinning off its mobile devices division, citing the macro-economic environment, stresses in the financial markets and changes underway in the unit itself. It said the spin off would instead take place after 2009.