CHICAGO - Motorola Inc. replaced its chief financial officer Wednesday in a shake-up of top management as it slashed its first-quarter forecast, blaming weaker-than-expected revenue from its cell-phone unit. Still reeling from sales and profit problems that emerged in the fourth quarter, the company said it now expects to report a first-quarter loss because of what Chairman and CEO Ed Zander called an "unacceptable" performance by its mobile device business.
Thomas Meredith, 56, was named acting chief financial officer, effective April 1. He replaces David Devonshire, 61, who will retire from the position. Zander also named Greg Brown, president of the company's networks and enterprise business, to the vacant posts of president and chief operating officer.
The surprise announcement after markets closed reflected even deeper turmoil within the Schaumburg-based company just a month after the head of its embattled handset business resigned.
Motorola shares tumbled 91 cents, or 4.9 percent, to $17.83, in extended-hours trading after closing the New York Stock Exchange session down 8 cents at $18.74. The stock has fallen 9 percent this year after a 9 percent decline in 2006.
The world's No. 2 cell-phone maker behind Nokia said it now expects sales for the January-through-March quarter of $9.2 billion to $9.3 billion, down more than $1 billion from its January forecast of $10.4 billion to $10.6 billion.
It said it expects to report a loss of 7 cents to 9 cents per share, including 9 cents per share in charges. That compares with the 17-cent profit forecast by analysts surveyed by Thomson Financial.
The company said it expects sales, profitability and operating cash flow for the full year to be "substantially" below its prior guidance.
"Performance in our mobile devices business continues to be unacceptable, and we are committed to restoring its profitability," Zander said. "After a further review following the leadership change in our mobile devices business, we now recognize that returning the business to acceptable performance will take more time and greater effort."
He said the company, no longer willing to boost market share at the expense of profit margin, decided not to match competitors' price cuts on some inexpensive models last month, and that hurt sales significantly.
"We decided in mid-February that we're not going to go chase that stuff (price cuts)," he said in an interview with The Associated Press. "We did take down our revenue because of that and our volume numbers because of that, but it's the right answer long-term."
Besides reshuffling top management, Motorola said it will buy back more of its lagging stock, accelerating $2 billion of share repurchases and increasing the size of its current share repurchase program to $7.5 billion.
Zander and Motorola already were under increased pressure from activist shareholder Carl Icahn, who recently has increased his stake in the company and is seeking a board seat in hopes of forcing actions to raise its stock price.
Motorola said the cell-phone unit, its largest, likely will report an operating loss in the first quarter due to slower unit volumes, a difficult pricing environment and a limited 3G product portfolio that is keeping its results in Europe below expectations.
The company, which had been coming off a nearly two-year period of nearly unprecedented gains because of the popularity of the Razr phone, stunned Wall Street in January by disclosing a steep drop in profitability in the handset division that led to its least profitable quarter since 2004.
It said it was cutting 3,500 jobs and taking other steps to reduce costs following misjudgments on pricing and sales forecasts for its high-end phones.
Zander said on a conference call that he was dissatisfied with the pace of restructuring steps taken since Ron Garriques' Feb. 16 departure as head of the mobile devices business, citing delays and other problems.
He maintained that the business should experience a gradual recovery in the second half and be profitable for the full year.
Gone, however, is the prediction that Motorola would return to double-digit operating profitability in the second half.
"The recovery will be gradual and substantially less than what we thought back in January," Brown said on the conference call.
The 46-year-old Brown joined Motorola in 2003. He previously headed Micromuse, a network management software company, and before that worked at Ameritech and AT&T.
Meredith, a Motorola board member, is a general partner of the investment management firm Meritage Capital and chief executive of MFI Capital.
Neil Strother, a wireless analyst in Seattle for Jupiter Research, said the key to Motorola's downfall has been vulnerability at the top of its product lineup, until recently considered the industry's strongest.
"They've been searching around for another hit product to follow the Razr and so far haven't come up with that," he said. "Pebl, Rizr, Krazr have been innovative but nothing that's set the market on fire."
"It's a very tough market globally, and you've got good competitors right behind Motorola in Samsung and LG," Strother said. "If you make a mistake, you pay a price."
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