Motorola (NYSE:MOT) may be the next large American technology company to go into bankruptcy. Telecom equipment maker Nortel, which has several related businesses, filed for Chapter 11 yesterday.
Motorola has two successful divisions. One of these makes home electronic devices including set-top boxes. The other provides telecom infrastructure to large enterprises and governments. Each of them has had positive operating income over the last several quarters.
Motorola's handset division, however, is taking on water quickly. It will cut another 4,000 people this year. It was going to be spun off from the rest of the company, but its sales fell so quickly that the option was killed. Now, a bankruptcy judge may do what the company would not -- liquidate the handset business completely.
According to The Wall Street Journal, "Motorola is scrambling to stem losses in its flagship mobile devices division, which sold 19 million phones in the fourth quarter, down from 25.4 million in the third quarter and 40.9 million in the fourth quarter of 2007." Three years ago, the company has 22% of the global handset market and told investors that the figure could easily rise. Its actual share may be falling below 10%.
Of course, Motorola did what most companies do. It scaled up its costs for great success and could not imagine its expenses should be set for a large downturn in its business. Now, it cannot cut those costs fast enough and it will have to layoff people who might be essential to a recovery.
That will be the end of Motorola, at least the Motorola Wall Street has known.
Douglas A. McIntyre is en editor at 24/7 Wall St.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
1-15-2009 @ 10:59AM
jim thompson said...
WHERE CAN I FIND THE LOWEST AND HIGHEST PRICE EVER ON THESE STOCKS
1-15-2009 @ 3:33PM
steven said...
I don't agree with Douglas's opinion. It's a good move for Motorola from the point of view of the company. At this stage, no one can be sure when the mobile handset market will be due to recovery. Motorola would rather put more efforts on improving the competitive abilities of other units. A lot of telecom engineers already lost their jobs, and when the time is appropriate, it's easy for Motorola get the staff they may need. No one know what the future handset market would like to be, just a few years ago, no one would imagine Google would become a mobile handset market "player". Like Google there are lots of companies making money in searching engines, internet advertising and etc. When the companies get loaded enough, any one of them could jump into the handset market. The profit margin for mobile handset would become smaller. Not like before, mobile phones are luxury goods, now they are just like a common electrical.