Moto cuts 7,000 jobs, broadens agreement with TSMC

Motorola Inc., Schaumburg, IL, will eliminate another 7,000 jobs (about 7% of its work force) and will incur $3.5 billion in charges in a cost-cutting move that it said basically completes its comprehensive two-year restructuring.

As part of the restructuring, Moto has reduced its work force from a high of 150,000 in August 2000 to the roughly 100,000 people it now employs. The latest cut will reduce its work force to about 93,000, said spokesman Scott Wyman, adding that the reductions will begin in July and continue into 2003.

“This comprehensive restructuring purposefully returns Motorola to approximately its mid-1990s size, the era prior to the excesses of the telecom and dot-com booms,” said Christopher Galvin, Motorola’s chairman and chief executive.

Motorola said the charges associated with its latest restructuring will cost about $3.5 billion, with about 90 percent of it expected to occur in the current quarter and the rest to follow in the second half of the year.
The cell-phone and semiconductor giant said it remains on track to return to operating profitability in the second half of the year.

The company in a statement said the new cuts will affect all business segments and corporate headquarters operations. It is part of an effort to lower expenses in a number of areas, including manufacturing, sales and research and development.

About 3,000 of the job cuts will come from the Motorola’s wireless infrastructure business, Wyman said. Wireless is Motorola’s third-largest business behind cell phones and semiconductors, with most of its operations in North America, followed by Europe and Asia.

About $1.9 billion of the charges are tied to the work force reductions and a plan to write down some of its semiconductor plants to fair-market value, the company said. Another $1.1 billion in charges is tied to its plan to lower market valuations of investments and other assets, officials said.
The company also plans to write off $530 million in long-term financing related to a loan to Turkish cellular service operator Telsim, which remains in default.

The company reaffirmed its second-quarter earnings projection, saying it expects to meet or be slightly better than a loss of 4 cents per share. The consensus forecast of analysts surveyed by Thomson Financial/First Call is for a loss of 4 cents a share.

Motorola also said it still expects to show an operating profit in the third and fourth quarters this year, excluding charges. The company reports second-quarter earnings in mid-July.

Motorola also confirmed that it has reached a broadened agreement with TSMC that will increase Motorola’s outsourced manufacturing over the next several years. Motorola said in a statement adding that the agreement will result in the portfolio of products TSMC builds for Motorola being enhanced.

Bill Walkerm, senior VP and GM of Motorola’s semiconductor products sector, said, “While our recently announced partnership with STMicroelectronics, Philips, and TSMC is dedicated to breakthrough technology development, this relationship guarantees us additional access to external manufacturing capacity aligned with the jointly developed process technology.”

The agreement with TSMC enables Motorola to broaden manufacturing capability for a wide range of technologies and will also allow Motorola the flexibility to work with other foundry partners as needed.

In anticipation of this agreement, TSMC earlier this year increased its 2002 capital appropriation to $2.5 billion for projects, TSMC President Richard Tsai reported.

“The appropriation also allows us to expand the availability of leading-edge technologies. Our total manufacturing capacity is expected to nearly double to 8 million wafers by the end of 2006, allowing us easily to satisfy the immediate and future needs of Motorola and all of our foundry customers around the globe,” Tsai told Agence France Presse.


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