Why Did Motorola's (MOT) Job Cuts Come So Late?

The beatings will continue until morale improves.

Motorola (MOT) cut another 2,600 jobs bringing the total since the beginning of last year to 10,000. According to The Wall Street Journal "Motorola, which is struggling to cope with a sharp plunge in cellphone sales, said it expects to take a first-quarter pretax charge of $104 million resulting from severance costs related to the latest job cuts."

The move is another example of the short-sighted MOT management. It has been clear for some time that the company will sell fewer handsets each quarter until it comes up with products which are more popular with consumers. Why was it not clear that more people had to go when the company looked at its business in mid-2007? The answer is that it was a victory of hope over reason. The senior executives at Motorola believed that business might pick up even though there was no empirical evidence to support that.

Motorola is almost certain to have more job cuts. Wall St. is guessing that the company only shipped 30 million handsets in the first quarter, In 2007, the cell phone division did $19 billion in revenue and lost over $1 billion. The sales in that operation could fall to $15 billion or less and the operating loss could double.

Motorola still has far too many people. The sooner it admits that, the better.

Douglas A. McIntyre