Motorola seen cutting more jobs as phone sales fall

By Sinead Carew - Analysis

NEW YORK (Reuters) - Motorola Inc (MOT.N) 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 (NOK1V.HE) 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 percent 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 percent or more in 2009. Some analysts now expect sales to fall as much as 15 percent 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.