Motorola Inc is expected to make steep cost cuts, including more layoffs, at its mobile devices division as a broad slump in demand for cell phones exacerbates its own market share declines.
With even market leader Nokia warning about weakening phone demand, analysts say Motorola could miss Wall Street's already low expectations for phone sales in the fourth quarter and the current quarter. As a result, they expect Motorola to cut the size of its handset unit -- beyond the 3,000 layoffs the company announced in October, which were mostly in its handset unit and equivalent to 4.5 per cent of its workforce.
"Resizing is necessary beyond the 3,000," said Avian Securities analyst Matthew Thornton, who estimated that Motorola's phone unit could have roughly 28,000 employees after the previously announced layoffs.
Motorola declined to comment. The Schaumburg, Illinois-based company fell to fourth place in the global phone market in the third quarter of 2008, and said key new devices would be ready in the second half of 2009, which could mean deeper market share losses until then.
This was before Nokia said in December that it expected the phone market to shrink 5 per cent or more in 2009. Some analysts now expect sales to fall as much as 15 per cent from 2008. As a result of the deteriorating market, Deutsche Bank analyst Brian Modoff estimated that Motorola needed to cut costs by roughly another $650 million, on top of the $800 million reductions already announced.
"Their cost structure is too high for where they need to be in this environment given their market share," said Modoff, who sees Motorola reporting 22 million phone sales for the fourth quarter just ended, and 17 million for this quarter. He estimated that with its current cost structure Motorola could break even if it sold about 28 million phones per quarter, but said that this figure was too high for comfort in the weak economy.
"I think they need to be profitable below 20 million units," said Modoff. Analysts on average expect Nokia to report 121.5 million phone sales for the fourth quarter, with estimates ranging from 110 million to 135 million.
They expect Sony Ericsson, which overtook Motorola in the third quarter, to sell about 26.6 million phones. Phonescoop.com, a blog about the latest phones, said Motorola could lay off as many as 50 per cent of its mobile phone workers, but analysts said this would be a "drastic" move.
Charter Equity Research analyst Ed Snyder said such a cut would mean giving up workers in research and development, and "dramatically" reducing the number of phones launched. But he said that such a move was not implausible.
"They're hemorrhaging cash. They have to cut the division," he said. But Deutsche Bank's Modoff said Motorola needs to be careful about where it makes cuts because it needs to be able to compete with popular devices such as Apple Inc's iPhone and phones based on Android, the operating system designed by Google Inc.
These phones have made the focus of industry competition more about innovative software and user interfaces than about phone hardware."They should keep (jobs) in software and chop them in hardware. The emphasis needs to be placed on low cost designs and operating systems," said Modoff. In the third quarter, Motorola's mobile unit revenue fell 31 per cent to $3.1 billion, and the unit's operating loss widened to $840 million from $248 million.
Agencies
Wednesday, January 14, 2009
Will global tech spending decline in 2009?
Technology companies face a bumpy ride in 2009. Global business and government spending on computer, software and communications products and consulting services is expected to decline 3 percent this year, Forrester Research said in a report due out Tuesday.
This would mark the first decline since 2002, when information-technology spending dropped 6 percent after falling the same amount in 2001.
However, this downturn is not expected to last as long. Forrester projects tech spending to recover next year, rising as much as 9 percent in 2010.
In addition to the recession, the strengthening dollar is also to blame for the drop-off Forrester sees this year. Just as the weak U.S. currency boosted the growth rate of technology purchases made in dollars in 2008, the now-stronger dollar will hurt it in 2009, according to Forrester. Western Europe's technology spending rate is a good illustration of the currency discrepancy: measured in dollars, tech purchases in the region will be down 7 percent in 2009. Tech purchases in euros will be up 1 percent.
To neutralize the effect of currency changes, Forrester also projected the global technology market using a ``basket'' of local currencies, weighed for how big a share of the market each region holds. Using this measure, technology purchases are expected to have grown by 4 percent in 2008 and post growth of 3 percent in 2009, and 6 percent in 2010.
Certain aspects of technology will fare better. For example, Forrester expects software purchases to total $388 billion this year, the same as in 2008. But computer equipment purchases, which includes personal computers, servers and storage devices _ are expected to decline 4 percent, to $434 billion. That's because businesses often see software as a moneysaving tool, while buying new computer equipment is something that can be put off until more prosperous times.
There are other trends at play, too, such as an ongoing decline in the server market, independent of the economy, said Forrester analyst Andrew Bartels. More companies are embracing server virtualization, a technology that allows one server to function as multiple machines, saving companies money and energy. Businesses are also realizing that their employees can use BlackBerrys, iPhones and small laptops known as netbooks for work. So, the analyst said, rather than issuing workers both a PC and a BlackBerry, companies might stick with just a BlackBerry.
A decline in demand for personal computers and other electronics weighed on the semiconductor industry for much of 2008. Intel Corp., the company behind the bulk of microprocessors that serve as the brains of PCs, lowered its fourth quarter revenue guidance for the second time last week amid weaker than expected demand.
While 2009 does not look good when it comes to tech spending, things aren't as dismal for the sector as they were in 2001 and 2002, after the bursting of the 1990s Internet bubble. In each of those two years, Bartels noted, technology spending declined 6 percent _ and that would have been true regardless of currency fluctuations.
Since then, technology has become so interwoven into how a company operates that it's no longer considered discretionary spending.
``It is the muscle of companies,'' Bartels said. ``It allows them to do what they want to do.''
Agencies
This would mark the first decline since 2002, when information-technology spending dropped 6 percent after falling the same amount in 2001.
However, this downturn is not expected to last as long. Forrester projects tech spending to recover next year, rising as much as 9 percent in 2010.
In addition to the recession, the strengthening dollar is also to blame for the drop-off Forrester sees this year. Just as the weak U.S. currency boosted the growth rate of technology purchases made in dollars in 2008, the now-stronger dollar will hurt it in 2009, according to Forrester. Western Europe's technology spending rate is a good illustration of the currency discrepancy: measured in dollars, tech purchases in the region will be down 7 percent in 2009. Tech purchases in euros will be up 1 percent.
To neutralize the effect of currency changes, Forrester also projected the global technology market using a ``basket'' of local currencies, weighed for how big a share of the market each region holds. Using this measure, technology purchases are expected to have grown by 4 percent in 2008 and post growth of 3 percent in 2009, and 6 percent in 2010.
Certain aspects of technology will fare better. For example, Forrester expects software purchases to total $388 billion this year, the same as in 2008. But computer equipment purchases, which includes personal computers, servers and storage devices _ are expected to decline 4 percent, to $434 billion. That's because businesses often see software as a moneysaving tool, while buying new computer equipment is something that can be put off until more prosperous times.
There are other trends at play, too, such as an ongoing decline in the server market, independent of the economy, said Forrester analyst Andrew Bartels. More companies are embracing server virtualization, a technology that allows one server to function as multiple machines, saving companies money and energy. Businesses are also realizing that their employees can use BlackBerrys, iPhones and small laptops known as netbooks for work. So, the analyst said, rather than issuing workers both a PC and a BlackBerry, companies might stick with just a BlackBerry.
A decline in demand for personal computers and other electronics weighed on the semiconductor industry for much of 2008. Intel Corp., the company behind the bulk of microprocessors that serve as the brains of PCs, lowered its fourth quarter revenue guidance for the second time last week amid weaker than expected demand.
While 2009 does not look good when it comes to tech spending, things aren't as dismal for the sector as they were in 2001 and 2002, after the bursting of the 1990s Internet bubble. In each of those two years, Bartels noted, technology spending declined 6 percent _ and that would have been true regardless of currency fluctuations.
Since then, technology has become so interwoven into how a company operates that it's no longer considered discretionary spending.
``It is the muscle of companies,'' Bartels said. ``It allows them to do what they want to do.''
Agencies
ING cuts 750 jobs due to economic slowdown
Dutch financial services group ING Groep NV will cut 750 jobs, or 7 percent of its US workforce, as part of a global programme to cope with the economic slowdown, ING spokesmen said on Tuesday.
"As many companies in the United States we need to align operations with market conditions," ING spokesman Dana Ripley said. US companies such as Bank of America Corp have announced job cuts in the past few months to deal with slowing business activity and the U.S. Labor Department said last week that employers cut payrolls by 524,000 in December.
ING will cut the jobs during the first quarter across all its U.S. banking and insurance operations and it will also not fill 170 vacancies in the United States, Ripley said. ING currently has about 11,000 US employees people and a total global workforce of 130,000.
The US job cuts are part of a global initiative to bring costs and operations in line with market conditions as ING said in November, ING spokesman Raymond Vermeulen said. He declined to say if there could be job cuts outside the United States. ING posted a third quarter loss of 478 million euros ($635.6 million) due to 1.5 billion euros of impairments, making it ING's first quarterly loss ever.
Agencies
"As many companies in the United States we need to align operations with market conditions," ING spokesman Dana Ripley said. US companies such as Bank of America Corp have announced job cuts in the past few months to deal with slowing business activity and the U.S. Labor Department said last week that employers cut payrolls by 524,000 in December.
ING will cut the jobs during the first quarter across all its U.S. banking and insurance operations and it will also not fill 170 vacancies in the United States, Ripley said. ING currently has about 11,000 US employees people and a total global workforce of 130,000.
The US job cuts are part of a global initiative to bring costs and operations in line with market conditions as ING said in November, ING spokesman Raymond Vermeulen said. He declined to say if there could be job cuts outside the United States. ING posted a third quarter loss of 478 million euros ($635.6 million) due to 1.5 billion euros of impairments, making it ING's first quarterly loss ever.
Agencies
Oracle cuts 500 jobs, says report
Oracle Corp. has trimmed its workforce, but not as much as some people had speculated, The Wall Street Journal reported on Tuesday.
Citing people familiar with the matter, the newspaper said the software giant cut around 500 positions in its North American sales and consulting businesses on Friday.
The Redwood Shores, California-based company had 33,526 employees in the Americas at the end of November and 86,657 globally, the report said.
An Oracle spokeswoman declined to comment to the newspaper and could not immediately be reached.
The Journal said the Internet has been buzzing with rumors of cuts of up to 10 percent of the company's workforce, a move that would affect thousands of people. Some analysts have put the number in the hundreds.
Agencies
Citing people familiar with the matter, the newspaper said the software giant cut around 500 positions in its North American sales and consulting businesses on Friday.
The Redwood Shores, California-based company had 33,526 employees in the Americas at the end of November and 86,657 globally, the report said.
An Oracle spokeswoman declined to comment to the newspaper and could not immediately be reached.
The Journal said the Internet has been buzzing with rumors of cuts of up to 10 percent of the company's workforce, a move that would affect thousands of people. Some analysts have put the number in the hundreds.
Agencies
Tuesday, January 13, 2009
Seagate sacks CEO and to cut 800 workers
Seagate Technology has replaced its top two executives and said it plans to cut 800 jobs — 10 percent of its US work force — as the hard drive maker endures a bruising slowdown in technology spending.
Its stock fell more than 15 percent. In a surprise move, the Scotts Valley-based company announced that William Watkins, 56, Seagate's chief executive since 2004, and Dave Wickersham, 52, the president and chief operating officer, had both left the company, effective immediately. Seagate declined to make either executive available for comment.
The company also announced that it plans to cut 10 percent of its 8,000 US-based workers. It has 53,000 workers worldwide.
A familiar face will fill the CEO slot. Stephen Luczo, 51, a former investment banker who served as Seagate's CEO from 1998 until 2004 amid a wrenching restructuring, will have to engineer another big turnaround to get the company back on track.
Wickersham's jobs will be taken by Robert Whitmore, 46, Seagate's executive vice president and chief technology officer.
Seagate is the world's largest maker of computer hard disk drives, with more than 30 percent of the global market. But its business has suffered badly because of the economic meltdown, which has sapped information-technology budgets and demand for new personal computers and servers that use Seagate's products.
Oversupply in the industry has also hurt Seagate and other disk drive manufacturers. Luczo takes the reigns of a company whose stock price plunged more than 80 percent last year and that warned in December its fiscal second-quarter results would fall far below Wall Street's expectations. Seagate lowered its guidance for sales in the period by about $500 million, cautioning that slumping demand and price pressures were hurting the company more than it had anticipated.
Seagate, which is scheduled to report its full quarterly results Jan. 21, expects revenue of $2.3 billion to $2.6 billion.
Agencies
Its stock fell more than 15 percent. In a surprise move, the Scotts Valley-based company announced that William Watkins, 56, Seagate's chief executive since 2004, and Dave Wickersham, 52, the president and chief operating officer, had both left the company, effective immediately. Seagate declined to make either executive available for comment.
The company also announced that it plans to cut 10 percent of its 8,000 US-based workers. It has 53,000 workers worldwide.
A familiar face will fill the CEO slot. Stephen Luczo, 51, a former investment banker who served as Seagate's CEO from 1998 until 2004 amid a wrenching restructuring, will have to engineer another big turnaround to get the company back on track.
Wickersham's jobs will be taken by Robert Whitmore, 46, Seagate's executive vice president and chief technology officer.
Seagate is the world's largest maker of computer hard disk drives, with more than 30 percent of the global market. But its business has suffered badly because of the economic meltdown, which has sapped information-technology budgets and demand for new personal computers and servers that use Seagate's products.
Oversupply in the industry has also hurt Seagate and other disk drive manufacturers. Luczo takes the reigns of a company whose stock price plunged more than 80 percent last year and that warned in December its fiscal second-quarter results would fall far below Wall Street's expectations. Seagate lowered its guidance for sales in the period by about $500 million, cautioning that slumping demand and price pressures were hurting the company more than it had anticipated.
Seagate, which is scheduled to report its full quarterly results Jan. 21, expects revenue of $2.3 billion to $2.6 billion.
Agencies
Will the Rs 2000 crore government package bailout out Satyam?
Speculation is rife that the government is considering a package of up to Rs 2,000 crore to bailout the crisis-ridden Satyam Computer but no confirmation could be obtained.
Shortly after the Prime Minister Manmohan Singh's review meeting on Satyam on Tuesday, there was media speculation that government would be considering a financial assistance ranging between Rs 500 crore and Rs 2,000 crore but the PMO office declined to comment on it.
"We have nothing to say on this," a top PMO official said when asked about if the government was considering giving financial aid to Satyam which is confronting a cash crisis.
Meanwhile, official sources indicated that the government appointed Satyam board has written a letter to the finance ministry raising concerns about the liquidity crunch in the troubled company.
Talking to reporters after the first meeting of the new board in Hyderabad, HDFC chairman Deepak Parekh, who is member of the board, had said "working capital issues require immediate attention and we will work with the team to tide over this situation.
Satyam has 53,000 employees and needs over Rs 500 crore a month to meet the staff cost.
Commerce Minister Kamal Nath, who attended PM's review meeting, had said yesterday that the government was open to consider a financial package for Satyam.
Agencies
Shortly after the Prime Minister Manmohan Singh's review meeting on Satyam on Tuesday, there was media speculation that government would be considering a financial assistance ranging between Rs 500 crore and Rs 2,000 crore but the PMO office declined to comment on it.
"We have nothing to say on this," a top PMO official said when asked about if the government was considering giving financial aid to Satyam which is confronting a cash crisis.
Meanwhile, official sources indicated that the government appointed Satyam board has written a letter to the finance ministry raising concerns about the liquidity crunch in the troubled company.
Talking to reporters after the first meeting of the new board in Hyderabad, HDFC chairman Deepak Parekh, who is member of the board, had said "working capital issues require immediate attention and we will work with the team to tide over this situation.
Satyam has 53,000 employees and needs over Rs 500 crore a month to meet the staff cost.
Commerce Minister Kamal Nath, who attended PM's review meeting, had said yesterday that the government was open to consider a financial package for Satyam.
Agencies
Monday, January 12, 2009
Microsoft delays Windows 7 beta download
Microsoft Corp said on Friday it has paused offering downloads of the public test version of its new version of Windows due to "high demand."
The "beta" launch of the highly anticipated update to Microsoft's Windows franchise began early on Friday, but the company had to halt downloads to add more servers.
"We are adding servers as fast as we can add them," a Microsoft spokesman said at the Consumer Electronics Show in Las Vegas.
He declined to say when Windows 7 downloads would resume.
Microsoft said at CES on Wednesday it would let consumers test the next generation of its computer operating system starting Friday.
Microsoft, the world's biggest maker of software, has said Windows 7 will incorporate touch screen technology and allow users to more easily personalize the system. It promised more user-friendly features, such as a new taskbar that previews all open windows from a single application by hovering over the program's icon.
The "beta" launch of the highly anticipated update to Microsoft's Windows franchise began early on Friday, but the company had to halt downloads to add more servers.
"We are adding servers as fast as we can add them," a Microsoft spokesman said at the Consumer Electronics Show in Las Vegas.
He declined to say when Windows 7 downloads would resume.
Microsoft said at CES on Wednesday it would let consumers test the next generation of its computer operating system starting Friday.
Microsoft, the world's biggest maker of software, has said Windows 7 will incorporate touch screen technology and allow users to more easily personalize the system. It promised more user-friendly features, such as a new taskbar that previews all open windows from a single application by hovering over the program's icon.
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