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ComputerWire: IT Industry Intelligence

Motorola Inc is to cut its workforce by a further 7,000 in a move that it hopes will complete the restructuring of a company desperate to claw its way back to profitability after badly losing its way.

The short-term effect however will be to plunge it deeper into the red as it expects to record a special charge of $3.5bn, mainly in the second quarter, for reorganization and asset write-downs.

"What we're doing here is taking the company back to about its 1995 size, before the era of the excesses of the dot-com and telecom booms," said chairman and CEO Christopher Galvin.

Though the Schaumburg, Illinois-based company has cut its workforce from a peak of 150,000 in August 2000, it cannot expect a quick upturn this year to pick up the slack with sales down 22% in the first quarter.

It is placing great emphasis on an "asset light" semiconductor business model, with production outsourced to Taiwan Semiconductor Manufacturing Co Ltd. So much of the $1.1bn it will record in lower market valuations of its assets will be in relation to its fab plants, but it expects lower investment costs in future.

The latest round of job cuts will cost around $1.9bn in a reorganization that it said will hit all business segments and corporate headquarters operations. It claims that lower manufacturing, R&D costs and general expenses will save $100m in the remainder of the current year and provide savings of $700m.

Motorola is sticking by a forecast of a 5% to 10% decline in sales this year and expects to show a profit for the third and fourth quarters, and for the full year. This will however be before the special items totalling $3.5bn, though only 20% of this will be cash related.

Though Motorola and Nokia remain in a legal tussle with Turkish mobile operator Telsim, it plans to write off the $530m it is owed by the company.

© ComputerWire

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