Motorola to kiss 5,000 middle managers
goodbye
Razr losing its edge bodes ill for iPhone
By Tony Dennis: Saturday 20 January 2007, 14:33
IN A WEB broadcast, Motorola informed the world that it expects to
lose 5 per cent of its 70,000 workforce. The brunt of the 3,500 job
loss will be felt by middle managers.
The reason for the cuts is very clear. It saw a drop in operating
profit margins to below 5 per cent in Q4 2006 from 11.9 per cent in
Q3 2006.
That's a mean feat. Understandably CEO Ed Zander stated, "Our goal
is to return to double-digit operating margins in the second half
of this year." Motorola says it expects to do so by reducing the
cost of making phones.
The company chiefly blamed price cuts for its flagship Razr phone
for the drop in margins. It also claims that price competition in
emerging markets is 'brutal'.
This doesn't bode too well for Apple's iPhone. If ever there was a
high price designer handset it was the Razr. Yet in two years it
has already lost its steam.
Apple hopes to sell 12 million iPhones at high prices. Yet is has
nothing like the distribution model of Motorola, the world's Number
Two vendor.
Still, Motorola said it shipped 65.7 million handsets in Q4, up 47
per cent from Q4 2006, and its share of the global market rose to
an impressive 23.3 per cent, almost one point up from Q3.
New models to be launched in Q1-Q2 2007, the company hopes, will
restore its fortunes. Next month's 3GSM show should provide an
answer to that.
Motorola's comments about emerging markets help explain why it
recently said 'No' to participating in the GSM Association's '3G
For All' initiative. The company did well out of the previous
'Emerging Mobile Handsets' (EMH) programme but reckons that cheap
3G phones aren't possible yet.
The current pricing of 3G chipsets is reputedly why the iPhone
lacks a 3G capability. Can a handset really support a high price
tag if it doesn't support the highest tech specs?
Look at the Nokia Vertu. That had a high price tag and luxury
fittings. But its tech spec was awful.