By Eric Jackson
Carl Icahn no longer manages outside investors' money. This prompted his former right-hand man, Keith Meister, to leave last December to start a new hedge fund. So why is Meister still serving on the Motorola Mobility board as Icahn's representative?
Read my full post at Forbes.
Motorola's (MOT) numbers this morning weren't pretty. For once in a long time, it wasn't only the Mobile Devices division that did in the quarter but the home networks and enterprise ones joined in, with profits in those units down 25% and 37% respectively from a year earlier.
Like a lot of companies this earnings season, MOT missed on the top line but beat on the bottom.
Mobile devices will not be spun-off any time soon, according to co-CEO Sanjay Jha.
Investors didn't like what they heard, and shares are off 7% this afternoon.
The company does have a number of positive things going for it. We're likely approaching the trough for worldwide sales of mobile devices. As people shun traditional PCs in favor of lighter netbooks and mobile computing devices, this market is set to rebound. RIMM's and Apple's (AAPL) recent earnings demonstrate this thesis is working. It's also comforting to know that, as bad as things have been for MOT, it still sold more phones than RIMM and AAPL did last quarter combined.
The bad news is that MOT is still led by an awkward co-CEO structure that was created when splitting the company seemed imminent. Greg Brown was an uninspiring choice to replace Ed Zander from the start. This company's board is still pretty much the one that oversaw the company perform hari-kari on itself. It's also very quickly destroyed its brand identity it had recaptured thanks to the RAZR.
It's possible the roll-out of the Google (GOOG) Android phones later in the year will create some buzz to jumpstart flagging mobile devices sales (down 45% from a year ago), but those are quite a few eggs in one basket. I would stay away from MOT.
Position: None.
Originally published in RealMoney.com on 4/30/2009 3:11 PM EDT
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By Roger Cheng Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)
Thursday January 15th, 2009 / 17h30
- The bloodletting has only begun for Motorola Inc. (MOT). Fresh off of eliminating 4,000 jobs, many believe the embattled telecommunications equipment maker still needs further cuts to survive, particularly as it feels the squeeze from a faltering handset market and increased competition. Even after the recent cuts, critics believe the company still carries a bloated work force.
"They are still way too overstaffed," said Bill Choi, an analyst at Jefferies & Co. "What you really need is a combination of cost reductions and a meaningful improvement in the portfolio."
Motorola shares recently rose 6 cents, or 1.5%, to $4.17.
While Motorola has been working on better handsets, including more smartphones, analysts don't see anything significant coming out until the end of the year. In the near term, the company can only control the costs.
Motorola spokeswoman Jennifer Erickson declined to comment, saying the company wouldn't speculate on further job cuts.
The cuts are expected to yield $700 million in savings this year. That comes on top of the $800 million in savings gleamed from restructuring actions taken in the fourth quarter.
In the past three months, Motorola announced 7,000 job cuts, with 5,000 coming from the mobile devices division. That's roughly a 25% reduction in the unit, but many believe that isn't sufficient. The company still has roughly 20,000 employees in its mobile handset business.
In comparison, Sony Ericsson, which sells slightly more handsets than Motorola, employs 9,400. The company, a joint venture between Sony Corp. (SNE) and L.M. Ericsson Telephone Co. (ERIC), has said it wants to cut 2,000 workers. While a direct comparison between Sony Ericsson and Motorola is unfair, the difference in staff versus their similar handset sales numbers is telling.
"The issue of the day is cost," said Eric Jackson, managing member of activist hedge fund Ironfire Capital LLC and a former Motorola shareholder. While getting Motorola trimmer was one priority, Jackson believes the company's underlying problem comes from its lack of direction - a problem exacerbated by the co-chief executive leadership structure.
In terms of fixing the cost structure, analysts were reluctant to give specific numbers on the necessary cuts. "It's tough to say what the appropriate level is," Choi said. Motorola's cost structure will look increasingly out of hand as the mobile devices business continues to lose ground and handset shipments fall further.
In addition to the slowing handset market, other handsets are likely to take Motorola's share of the market. A new version of the Apple Inc. (AAPL) iPhone, new Research in Motion Ltd. (RIMM) Blackberrys, and even the Palm Inc. (PALM) Pre could slice into Motorola's high-end device sales, leaving it only the cheaper devices.
Motorola co-Chief Executive Sanjay Jha promised better smartphones. "We are making good progress in developing important new smartphones for 2009 and are pleased with the positive response from our customers to these new devices," Jha said in a statement.
Still, the new handsets aren't likely to arrive until the fourth quarter. "Their products are just not competitive," said Matthew Thornton, an analyst at Avian Securities LLC. "They're left in no man's land." But even if Motorola comes out with a blockbuster handset now, it couldn't turn a profit because its cost structure is too high, he noted. Beyond job cuts, Motorola will have to look hard at other places, including the supply chain, outsourced staff, and other general expenses. "It's a necessary step and the right step, even if it's not pleasant," Thornton said.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com
