Motorola Inc., the world’s No. 2 maker of cell phones, on Tuesday said it would cut 1,000 jobs in three of its units as it puts its effort behind wireless communications in an increasingly competitive market.
Motorola said the job cuts, which represent roughly 1 percent of its work force of 88,000, would be offset by hiring in other areas and its total work force would be reduced. It said it would take a pre-tax charge of $50 million for severance payments, and a separate charge of $80 million for the early repayment of debt.
The company said it will make no cuts in its cell phone business, ranked second behind Finland’s Nokia.
Schaumburg, Illinois-based Motorola said the job cuts will be in the security business, which makes government and commercial systems such as digital two-way radios; the automotive unit, which manufactures navigation systems; and the broadband business, which sells products to the cable industry.
In addition, Motorola is cutting corporate positions that supported Freescale Semiconductor Inc., the chip unit that it announced last October would go public, spokeswoman Jennifer Weyrauch said. She said most jobs would be eliminated in the third quarter.
“This doesn’t mean our work force number is going to go down,” Weyrauch said, adding that Motorola is continuing to hire new employees.
In 2000, before the technology sector took a downturn, Motorola’s payroll stood as high as 147,000 employees.
Ren Zamora, an analyst with Loop Capital Markets, said the latest cuts represent Chief Executive Ed Zander’s efforts to fine-tune Motorola’s business amid a slow recovery in the telecommunications industry after a three-year slump.
“I think broadband will probably take the brunt,” said Zamora, adding that the segment did not appear to be doing as well as the rest of the business.
The cuts in the other two divisions are probably “just fine-tuning what are already pretty well-run businesses,” he added.
Said Charter Equity Research analyst Edward Snyder: “The state of the sector is actually pretty good, especially on the handset side of the business. Most of the (manufacturers) have said this is going to be a good quarter for phone sales.”
Motorola said it would pay severance benefits of $50 million pre-tax beginning in the third quarter and through the first quarter of next year. The $80 million in pre-tax costs related to early debt repayments will be paid in the third quarter.
The company also expects proceeds of $218 million from the sale of shares of carrier Nextel Communications Inc., one of its largest customers.
