Motorola's Dim Forecast Raises Pressure on CEO
By Li Yuan, Christopher Rhoads and Joann S. Lublin
The Wall Street Journal
Thursday, July 12, 2007
Motorola Inc. warned of weaker-than-expected cellphone shipments
and said its mobile-devices unit will post a loss for the full
year, as the telecommunications-equipment maker continues to
struggle to revive its handset business.
The developments heighten pressure on Chairman and Chief
Executive Ed Zander, who has struggled to put the world's No. 2
handset maker by market share behind Nokia Corp. back on course.
The company in recent months has been hit by worsening handset
margins, a proxy fight, high-level defections and a declining
Motorola shares rose 1.87% yesterday to $17.95 amid speculation
that Mr. Zander might soon step down. When the company released
the profit warning after markets had closed, Motorola's stock
price fell by 1.67% to $17.65 in after-hours trading.
"His strategy is clearly not working," Edward Snyder, an analyst
at Charter Equity Research, said of Mr. Zander. Mr. Snyder added
he believes Motorola's board is taking a more active role in
execution and recruiting new management.
A Motorola spokeswoman said the company doesn't comment on
Motorola has rolled out some new cellphones lately, but they,
like those of competitors, have been overshadowed by the hype
surrounding the launch of Apple Inc.'s iPhone late last month.
"You need good new products, and Motorola still relies on its
old family of products," said Mark Sue, an analyst at RBC
Capital Markets. Motorola lacks a strong portfolio of multimedia
cellphones that operate on broadband wireless networks in Europe
and a broad family of products in Asia, where people change
their phones frequently, he added.
Motorola said second-quarter sales would fall well short of its
prior forecasts, citing lower cellphone shipments in Asia and
Europe. The company expects handset shipments in the period to
be about 35 million to 36 million, down from 45.4 million in the
March quarter and 51.9 million in the year-ago quarter.
Motorola has faltered in recent quarters because of the lack of
a successor to its hit Razr cellphone and declining margins in
its handset division, which accounts for more than half of the
company's sales. The problems forced the company to report a
first-quarter loss and to announce plans to slash jobs. The head
of the handset division resigned, among other management changes
in recent months.
The Schaumburg, Ill., company now expects to report sales for
the quarter ended June 30 were between $8.6 billion and $8.7
billion; it had forecast about $9.4 billion. Motorola said it
expects a loss from continuing operations between two cents and
four cents a share, including charges for previously announced
Motorola said its mobile-devices unit will have a larger
operating loss in the second quarter, and it no longer expects
the business to be profitable for the full year. The company
also announced that Stu Reed, executive vice president of its
integrated supply chain, will become head of the handset
Speculation has mounted in recent days about possible successors
to Mr. Zander, if the board should run out of patience. One
possible candidate is Dick Notebaert, who is leaving Qwest
Communications International Inc.
Write to Li Yuan at
firstname.lastname@example.org, Christopher Rhoads at
email@example.com and Joann S. Lublin at