Motorola Inc. announced Friday that it will cut an additional 4,000 positions worldwide in a move to reduce costs in a slumping economy, a mere two weeks after the Schaumburg, Ill.-based company slashed 7,000 jobs.
The latest round of pink slips brings the total number of Motorola’s job cuts since December to 22,000, about 15 per cent of the company’s workforce.
“Unfortunately, reductions have been necessary for us to improve financial performance, and this is something that we will have to continually evaluate as we monitor market and economic conditions,” Motorola networks sector president Edward D. Breen said in a statement. The cuts will affect three main businesses within Breen’s division: the commercial government and industrial solutions sector, the global telecommunications solutions sector and the broadband communications sector.
While the previous round of layoffs were attributed to decreased demand for handsets, Friday’s move indicates that the mobile infrastructure side of Motorola’s business is suffering, too.
“We’ve seen mobile infrastructure demand come to a screeching halt since December,” said Deutsche Banc Alex. Brown analyst Brian Modoff. “Carriers are cutting back on their spending.”
A representative for Motorola acknowledged that demand for wireless infrastructure has slowed but maintained that Friday’s downsizing was more directly related to the general cooling of the economy.
Motorola is hardly alone in feeling the pinch of declining demand for wireless infrastructure equipment. On March 12, Sweden’s Ericsson warned that it expected a pretax loss of as much as US$507 million for the first quarter. The company partially blamed the drop in infrastructure investments by U.S. carriers.
According to experts, the dip in capital spending by wireless carriers is not a sign of flagging interest in next-generation, so-called 3G wireless networks because the bulk of current infrastructure spending by carriers is still on current-generation, 2G products, Modoff said.
The bad news at Motorola comes a day after the close of the annual Cellular Telecommunications and Internet Association convention in Las Vegas, at which Motorola CEO Chris Galvin delivered the keynote speech.
In his speech, Galvin criticized the current system that governments use to auction wireless spectrum for next-generation wireless services. High bids for spectrum licenses in Europe have left many carriers with little money to actually build the networks. As alternatives, Galvin suggested that governments should allow carriers to adopt payment plans for spectrum purchases, as well as – no surprise here – the possibility of giving the spectrum away for free.
