Freescale, Motorola lay off on bleak cellular businesses

Amid efforts to sell or spin off their respective cellular handset chipset businesses, both companies plan job cuts and launch 2009 cost-savings efforts.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/3/2008

Both Freescale Semiconductor and its former parent company Motorola Inc have planned layoffs on September quarter losses, weak mobile sales, and the general macroeconomic situation.

On Freescale's end, the company said it will lay off at least 10% of its 2,400 employee base starting in Q4 as it looks to save $400 million in 2009.

The job cuts will reduce headcount in the company's supply chain, technology, marketing, and general and administrative functions. Freescale expects to incur cash restructuring charges of approximately $175 million on the move.

The Austin-based company announced the job cuts last week as it reported Q3 net sales of $1.41 billion, down slightly as compared to $1.45 billion in Q3 2007. Freescale's loss from operations, however, was up substantially. For the September quarter, loss was $3.37 billion, compared to a loss of $202 million in Q3 2007.

The Q3 statement and layoff announcement came after Freescale said in early October that it was exploring options for its cellular handset chipset business that include the unit's sale or the formation of a joint venture, so that it could focus more on the automotive and networking markets. 

CEO Rich Beyer on Freescale's call with financial analysts said that the company expects cellular business revenue to fall below the $100 million mark on a quarterly basis starting in Q4. Cellular net sales were $344 million in Q3, compared to $337 million in the Q2 and $349 million in Q3 2007.

Freescale's announcement also came in the same week that Motorola said it would postpone the separation of its mobile devices business and announced mounting Q3 losses.

Motorola stated earlier this year that it would spin out its mobile devices business, which has been causing the company's financials to drag for several quarters, and appointed Sanjay Jha, a 14-year Qualcomm veteran, to head the business in the interim. 

“While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009, primarily due to the macroeconomic environment, stresses in the financial markets, and the changes under way in mobile devices [Motorola unit]," Sanjay Jha, Motorola’s co-chief executive officer and CEO of the company's mobile devices business, said in a statement.

Reporting that Motorola has made progress in the separation plan, Jha added, “As part of our plan to rebuild mobile devices, we have announced significant actions to accelerate the consolidation of our product platforms and refocus our investment and market priorities. These efforts will result in a leaner organization with a more competitive and cost-effective product portfolio."

Although the company said it expects to save $800 million in 2009 on the efforts, Jha did not detail the "leaner organization" in the company's hour-long Q3 call with financial analysts. However, reports have stated that Motorola will lay off 3,000 workers, with more than two-thirds of the job cuts coming from the handset division, starting in Q4.

Motorola employed 66,000 employees in 2007 and has announced more than 10,000 job cuts since January. 

Jha's and Motorola's statements came as the company reported Q3 sales of $7.5 billion, compared to $8.8 billion in Q3 2007. Like Freescale, Motorola announced a tremendous jump in September quarter loss. Operating loss of $452 million compared to a loss of $10 million in the year-ago quarter.

Motorola's mobile devices segment sales were $3.1 billion, down 31% compared to the year-ago quarter. The segment reported an operating loss of $840 million, compared to an operating loss of $248 million in the year-ago quarter.