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>> Sunday, February 8, 2009

NEW YORK (Reuters) -- Motorola Inc. forecast a deeper-than-expected first-quarter loss, suspended its quarterly dividend and said it was looking for a new chief financial officer, sending its shares down 10%.

The embattled cell phone maker slid to fifth place from fourth in global rankings in the last quarter, and said Tuesday it expects its handset division to post a loss in 2009.

Motorola (MOT, Fortune 500) said it will focus on mid-tier to high-end phones, after losing ground for two years because it lacked a popular phone to compete with Nokia (NOK), Samsung Electronics, LG Electronics and Sony (ADR) Ericsson.

"We have our work cut out for us in 2009 as we focus on the future success of Mobile Devices," said Co-Chief Executive Sanjay Jha, who is also head of the mobile phone division, on a conference call. He said Motorola's sales volumes were falling faster than the industry's in the current quarter.

Jha said Motorola was still committed to using Microsoft Corp. (MSFT, Fortune 500)'s Windows Mobile software but that most of its focus in 2009 was on Google Inc. (GOOG, Fortune 500)'s competing Android software, with an emphasis on social networking features.

Motorola, which also makes television set-top boxes and wireless gear, forecast a first-quarter loss per share of 10 cents to 12 cents, wider than the average Wall Street estimate for a loss of 5 cents, according to Reuters Estimates.

Avian Securities analyst Matthew Thornton said he was expecting Motorola's handset unit to suffer, but he was worried the poor outlook could mean the rest of the business was also weakening due to the economic recession.

"The question is what's the driver for these lower expectations," he said. Thornton added that it made sense for Motorola to conserve cash by suspending its 5-cent-per-share quarterly dividend.

Motorola named its corporate controller Edward Fitzpatrick as acting CFO to replace Paul Liska. It said Liska's departure was appropriate given changes in the business environment, but he did not elaborate.
Low visibility

Motorola, which faces competition from Apple Inc. (AAPL, Fortune 500)'s iPhone, said it expected operating results to improve after the first quarter, but that visibility remained limited due to the uncertain economy.

It had $7.4 billion in cash at year-end, and said the suspension of its dividend from the second quarter onward would save the company $350 million in 2009.

However, Motorola expected costs of $300 million for previously announced layoffs in the first and second quarter.

Morgan Keegan analyst Tavis McCourt said the sharp fall in Motorola shares was likely due to the canceled dividend and weaker trends in Motorola's home and networks business, and enterprise business.

"In this economy especially, cash is king. If they can execute their turnaround, they can reinstate the dividend in 2010 or 2011," McCourt said.

Motorola reported a net loss of $3.6 billion, or $1.57 per share, compared with a profit of $100 million, or 4 cents a share, a year earlier.

Excluding charges for items such as goodwill amortization, Motorola's loss would have been 1 cent per share, compared with Wall Street's forecast for a loss of 2 cents a share, according to Reuters Estimates.

Revenue fell 26% from a year earlier to $7.14 billion, compared with analyst expectations for $7.07 billion.

Mobile device revenue fell 51% to $2.35 billion and its operating loss widened to $595 million from $388 million a year ago.

Motorola said it remained committed to its plan to separate its mobile devices division from the rest of its business, but that it did not expect this to happen in 2009.

Motorola shares were down 47 cents at $4.07 in early trading on the New York Stock Exchange.

Source: CNN.com


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