It will be a Grinch-like holiday at Motorola. The Schaumburg, Illinois electronics firm is reducing pay from the top down, with a 25 percent salary cut for its co-CEOs, canceling employee bonuses and slashing benefits programs for 2009.
In an announcement Wednesday, Motorola (NYSE: MOT) said continuing global economic challenges are prompting it to freeze employee pension plans and also suspend matching contributions to 401(k) plan. Co-CEOs Greg Brown and Sanjay Jha are voluntarily taking a 25 percent cut in base salary. Brown is also declining his cash bonus for this year and Jha is reducing his cash bonus by the same amount.
According to SEC documents Brown and Jha are both salaried at $1.2 million for 2008. Jha’s bonus is stipulated to be at least 200 percent of his base salary and he is contractually guaranteed a 2008 bonus of $2.4 million. Brown, who is closing out his first year as CEO, would have received a 220 percent bonus for 2008.
Motorola declined to state how much the latest cost reductions will save, but noted compensation and layoff actions earlier this year have saved $800 million.
“We will provide specific figures in our next earnings call,” a spokesperson told InternetNews.com. While no specific date has been set, Motorola’s first earnings report for a new year has traditionally occurred in late January or early February.
“The sustained downturn in the global economy requires that we take these difficult but necessary steps,” Brown and Jha said in a joint statement. “While serving our customers remains a top priority, we are equally focused on our cost structure, and we will continue to implement appropriate measures to conserve cash and reduce expenses.”
Motorola’s latest financial woes cap a turbulent year as it struggles to stay a leading player in a competitive mobile device market. It changed top leaders and revamped its mobile division strategy and reorganized business units several times. Its first layoff pushed 4,600 employees out the door, and another layoff action took place in October. The final tally will likely best last year’s total of 6,700.
Motorola also survived a nasty shareholder fight with Carl Icahn and announced it was going to split off its beleaguered handset division. Mid year it boasted it would push 50 new handsets into market during the year and hired Jha from Qualcomm during the summer.
While second quarter earnings brought slight hope, with break even earnings of just $4 million, third quarter financials found Motorola back in the red zone and struggling once again.
It reported a net loss of $397 million, or 18 cents per share, compared to 3 cents a share on a profit of $40 million in the same quarter last year.
Revenue dropped 15 percent to $7.48 billion, compared to the same time last year, slightly below analysts’ expectations of $7.8 billion for the third quarter. Sales in the mobile devices unit were $3.1 billion, down 31 percent compared to third quarter of 2007.