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Motorola to cut 7,000 more from its cell phone division

CHICAGO — Motorola Inc. slashed 7,000 more jobs Tuesday in its cellular phone division, the biggest move yet in a huge cost-cutting program that has seen it shrink its work force by more than 10 percent since December.

Hit by falling profits and worsening sales as the economy tails off, Motorola said the job cuts will take place by summer. No specific breakdown was given, but the company said the cuts will affect manufacturing, engineering and administrative jobs throughout its worldwide cell phone operations.

The tech giant, based in Schaumburg, Ill., has now announced layoffs or job eliminations for 16,000 workers in the past three months, slicing its work force to about 133,000 once the latest round of cuts takes effect, officials said.

"Unfortunately, this was a necessary next step for us to achieve renewal and stay competitive in today's dramatic business environment, particularly given the current slowdown in the economy," said Mike Zafirovski, president of Motorola's personal communications division, which makes cell phones, pagers and other wireless devices.

"We are committed to becoming the most cost-competitive enterprise in the industry in order to help grow our market share. We anticipate growth, but at a slower pace."

Motorola stock, which fell recently to a 2 1/2-year low, rose 8 cents to $15.04 a share Tuesday morning on the New York Stock Exchange.

Barely two years after cutting 20,000 jobs and taking a $1 billion loss in 1998, Motorola launched the latest restructuring late last year as it struggles to revive slumping profit margins.

The world's leading manufacturer of cellular phones until being overtaken by Nokia in late 1998, Motorola made several strategic errors that caused its share of the booming global market to spiral down to 13 percent by the fourth quarter of 2000, according to the Gartner Dataquest research firm. Finland's Nokia claimed a 34 percent share.

After having been slow to switch to digital phones, the company overestimated consumer demand for fancy, expensive phones and had to scramble to make less costly models. It was left with a complicated manufacturing platform and much higher costs than its competitors.

Motorola eliminated 2,500 jobs at its cell phone manufacturing facility in Harvard, Ill., in January, a month after disclosing 2,870 layoffs in Iowa, Florida and Ireland as part of a money-saving shift to more outsourcing. It also makes the handsets at plants in Boynton Beach, Fla., Mexico, Europe and Asia.

Motorola announced Feb. 23 it also was eliminating 4,000 jobs from its semiconductor business, hit hard by the economy's cooldown. It is the world's No. 5 manufacturer of computer chips.

The company warned then that four more company sites would be closed or sold and that another three were under consideration. Officials declined to discuss plant closing plans Tuesday, saying specifics were still being discussed.

Asked if more job reductions are likely, Leif Soderberg, head of strategy for Motorola's phone unit, said: "There's nothing planned at this point but clearly we're watching the markets closely. We're going to take the actions needed to make this business a competitive success."

Soderberg said inventory buildups that began late last year as the economy's growth eased were contributing to current problems. Industry forecasts for worldwide cellphone sales in 2001 also have been scaled back from close to 600 million to the current 475 million or less.

"A lot of inventory rebalancing will be done by the end of the first quarter, so all the prospects are there for market growth to kick in in the second half of the year," Soderberg said.