Motorola posts loss of $3.6 billion on slumping phone sales

A fourth-quarter net loss of $3.6 billion -- and more losses are expected.

The mobile phone business lost 51 percent in sales.

No more dividends.

The chief financial officer is gone. And the top chiefs said Motorola Inc. is still on the right track.

The Schaumburg-based communications company Tuesday said its bottom line continues to bleed, but vowed to Wall Street that it remains committed to its foundering mobile phone business, and seeks a break even point by 2010.

"We will continue our cost reductions over the next two quarters and many will be consolidating into fewer buildings," co-Chief Executive Officer Sanjay Jha said during an interview.

This consolidation includes various buildings at each of its suburban campuses in Schaumburg, Arlington Heights and Libertyville, where the Mobile Devices business is based.

On Tuesday, Motorola posted a fourth-quarter net loss of $3.6 billion, or $1.57 per share, compared to a $100 million profit, and 5 cents earnings per share, for the same period a year ago. Sales were $7.1 billion, down from $9.6 billion in the fourth-quarter last year. For the full year of 2008, Motorola reported a $4.2 billion loss, or $1.84 per share, compared to a $49 million loss, or 5 cents per share, in 2007.

Is there hope for a company that continually restructures, faces massive global pressures, a global recession and more losses?

"There is hope for Motorola but that hope lies in either drastically reducing or eliminating its exposure to mobile phones," said Edward Snyder, principal and telecom analyst with Charter Equity Research. "Most of its other businesses are quite profitable, but nearly all that profit and the cash derived from it is being consumed by phones."

Co-CEOs Greg Brown and Jha avoided giving a global head count for Motorola, saying the company would file its annual report soon with the U.S. Securities and Exchange Commission.

Analysts estimated that Motorola's work force is in the 50,000 to high 40,000 range.

A December 2007 SEC filing said the work force was 66,000.

The company said its previously announced 7,000 job cuts have started, with the bulk happening now through June. Motorola also will be cutting "thousands" of contractors by the end of the year, Brown said.

The work force is about 50 percent overseas and 50 percent in the United States, Brown said during an interview.

In fact, the communications industry, broadband investment, infrastructure improvements as well as research-and-development tax credit in the United States were among the topics Brown discussed with President Barack Obama last week.

Brown was among a small group of CEOs invited for the meeting at the White House.

"He was very engaged and did more listening than talking. … He was clearly committed to seeing us move forward," Brown said of Obama.

Jha and Brown said they are committed to the mobile phone business and the company moving forward as well, especially with about $7.4 billion in cash reserves.

"We have never considered bankruptcy or asking for a buyout," said Brown. "In fact, we want to invest and grow this business as fast as we can."

They expect to introduce new smartphones later this year and will focus more on mid- to high-end products, they said.

Motorola is really a tale of two companies: a core business that is doing OK and managing a tough economy, and the phone business, where turnaround efforts are significantly compounded by the headwind, said Mark McKechnie, telecom analyst with Broadpoint AmTech.

"Sanjay Jha has the right strategy, focus on smart phones with third-party solutions like the Android," said McKechnie.

Either the executives believe they can fix the mobile phone business or they are allowing emotions and psychology to influence their judgment, said Alex Dannin, telecom analyst with Morningstar Inc.

"The devices business used to be the biggest moneymaker for Motorola accounting for 66 percent of sales in 2006. There is a danger (when) the company is sacrificing the profits from its good businesses in a hopeless cause to salvage from a dying business. I don't believe it's reached that point yet, but I'm watching for it," he said.

In addition, Motorola suspended its quarterly cash dividend. The company was paying 5 cents per share, with a 4.4 percent return. It paid about $453 million last year in dividends.

Besides the losses, Motorola said Tuesday that its Chief Financial Officer Paul Liska left the company after less than a year in that position. No reasons were given.