Motorola CEO Eyes More CutsMotorola CEO Eyes More Cuts

CHICAGO (AP) -- Motorola Inc., already significantly smaller after an extended restructuring, faces the prospects of more cuts under new CEO Ed Zander.

Two weeks into his job with the U.S. cell-phone giant, the ex-Silicon Valley executive signaled his intention for further reductions--even with the company coming off a significantly improved fourth quarter.

"There's a lot of things we're going to go do here," he told analysts in a conference call Tuesday. "We have to have a cost structure that's competitive in the markets we serve. ... I think there's a lot of low-hanging fruit that we can go after in terms of our cost structure and our resources."

Zander's predecessor, Christopher Galvin, slashed Motorola's work force from a peak of 150,000 in 2000 to about 88,000 when he departed last month, and that number will drop further when Motorola spins off its 23,000-employee semiconductor unit this year.

But despite recent signs of progress, as evidenced by the $489 million profit reported after markets closed Tuesday, Galvin was unable to turn the company around or keep it from falling far behind rival Nokia.

Zander said he needs more time to meet with customers and study the Schaumburg, Ill.-based company's operations before he decides on a course of action, which could include shedding another business unit.

Morningstar analyst Todd Bernier said it was a good quarter for Motorola, especially for its semiconductor and networking equipment units, which both registered strong gains. But he called the cell-phone results disappointing--citing a profit margin of less than 4 percent compared with over 20 percent for Nokia along with the product shipment delays that resulted in a 3 percent drop in sales for the unit.

"For all the talk about how they're having a recovery in that business, they keep dropping the ball," Bernier said. "And it's unacceptable that you miss the Christmas selling season" with key products, he added.

Net earnings for the quarter nearly tripled the previous year's total. Excluding special items, operating earnings were 17 cents a share--4 cents per share better than the consensus estimate of analysts surveyed by Thomson First Call.

Revenues were $8.02 billion, up 4 percent from $7.7 billion despite the problems with getting new camera phones to market on time.

Motorola executives maintained that the new cell phones--among a total of 21 they released in the second half of 2003--are getting a positive reception in the market, and pointed to a 64 percent jump in orders during the quarter. Zander said the fourth-quarter results "provide further evidence that top-line growth has returned and that further improvement in profitability can be achieved."

Investors remain hopeful. Motorola shares closed Tuesday at a two-year high of $17.05 on the New York Stock Exchange.