Motorola Announces 3,500 Job Cuts As Profits Slump

Sales up but profits way down as prices were reduced to keep up with competition.

Motorola Inc., the world's second-largest mobile phone maker, announced 3,500 job cuts Jan. 19 after reporting a sharp fall in earnings due to an industry price war. The company's revenues surged by 17% to a record $11.8 billion in the fourth quarter through December, thanks to robust worldwide demand for the latest cell phones. But its quarterly net profits slumped 48% to $624 million, as the company was forced to slash prices to keep up with competition for share of a market that is dominated by Finland's Nokia.

Motorola said its 2006 net profits slowed 19.6% to $3.7 billion compared to 2005.

The layoffs represent five percent of Motorola's global workforce of 67,000. On a conference call with industry analysts, Motorola chief executive Ed Zander said it should generate savings of $400 million over the next two years.

The tale of Motorola's star model, the Razr phone, is emblematic for an industry that has been slashing prices to woo customers now that mobile phones have become ubiquitous in many societies. Motorola launched the Razr in 2004 as a luxury model priced at $500. But the phone, which did much to help the company take the fight back to Nokia, can now be found for less than $50 in the U.S.

Copyright Agence France-Presse, 2007

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