Motorola makes further cuts, but may prove "drop in the ocean"

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Motorola makes further cuts, but may prove "drop in the ocean"

By CAROLINE GABRIEL

Published: 18 December, 2008

READ MORE: Motorola

Ericsson may seem immune so far, but elsewhere in the wireless infrastructure market, December has seen little but restructuring plans and cutbacks. It was Motorola's turn this week, announcing plans to freeze US pension plans and company-wide salary increases, as well as cutting executive pay. All this on top of a string of reorganizations and the decision to put on hold the spin-off of Motorola's devices business.

Specifically, the fallen giant will put its US pension plans on ice, stop matching company 401(k) contributions, halt almost all pay rises for 2009, and reduce executive compensation - co-CEOs Greg Brown and Sanjay Jha are setting the tone by taking a 'voluntary' 25% cut. It will continue to provide funding to meet its existing pension obligations to current and future retirees but will eliminate benefits from March 1 2009. In the third quarter, Motorola suffered a $397m loss and cut 3,000 jobs and its debt rating was recently downgraded to 'junk' status by ratings agency Standard & Poor's.

The company said its latest moves would create extra savings on top of the $800m targeted in October's cutbacks plan, and analysts estimate the additional sum to be about $100m - which was described by some as "a drop in the ocean", with some analysts and investors calling for more drastic action to match the collapsing economic situation. Motorola is widely expected to suffer the worst, among the top five handset makers, during the cellphone downturn, because of a poor product mix and over dependence on the vulnerable midrange market.