Motorola to kiss 5,000 middle managers goodbye

The reason for the cuts is very clear. It saw a drop in operating profit margins to below 5 per cent in Q4 2006 from 11.9 per cent in Q3 2006.

That's a mean feat. Understandably CEO Ed Zander stated, "Our goal is to return to double-digit operating margins in the second half of this year." Motorola says it expects to do so by reducing the cost of making phones.

The company chiefly blamed price cuts for its flagship Razr phone for the drop in margins. It also claims that price competition in emerging markets is 'brutal'.

This doesn't bode too well for Apple's iPhone. If ever there was a high price designer handset it was the Razr. Yet in two years it has already lost its steam.

Apple hopes to sell 12 million iPhones at high prices. Yet is has nothing like the distribution model of Motorola, the world's Number Two vendor.

Still, Motorola said it shipped 65.7 million handsets in Q4, up 47 per cent from Q4 2006, and its share of the global market rose to an impressive 23.3 per cent, almost one point up from Q3.

New models to be launched in Q1-Q2 2007, the company hopes, will restore its fortunes. Next month's 3GSM show should provide an answer to that.

Motorola's comments about emerging markets help explain why it recently said 'No' to participating in the GSM Association's '3G For All' initiative. The company did well out of the previous 'Emerging Mobile Handsets' (EMH) programme but reckons that cheap 3G phones aren't possible yet.

The current pricing of 3G chipsets is reputedly why the iPhone lacks a 3G capability. Can a handset really support a high price tag if it doesn't support the highest tech specs?

Look at the Nokia Vertu. That had a high price tag and luxury fittings. But its tech spec was awful. µ

See also
Motorola snubs 3G handset initiative