Motorola said it would shed 3,000 jobs, or slightly less than 5 percent of its work force, and delay a planned spinoff of its mobile devices unit as it spends 2009 trying to develop smartphones that will excite the public.
The slow economy and waning interest in its lineup of cellphones will make the job even harder. Sanjay K. Jha, who took over as chief executive of the mobile devices business in August, warned investors on Thursday that a turnaround was more than a year away.
Motorola, once the market leader, finds itself behind other handset makers because it did not design smartphones, as Nokia, Samsung and Apple did. Motorola had the best-selling cellphone by 2006, the Razr, but lost its lead by churning out updated models. When that phone’s popularity faded, Motorola had little to replace it.
It will not have much in the pipeline until late next year, and it will begin selling its first touch screen phone in the United States, the Kraze ZN4, this fall.
Mr. Jha said Motorola would make smartphones to compete with the various BlackBerry models made by Research in Motion and the iPhone by Apple.
“We have been too focused on bright shiny objects and not on the user experience,” Mr. Jha said in a conference call with analysts after Motorola announced its third-quarter results.
He said he planned to have phones designed that used one of only two operating systems: the new Android by Google and Windows Mobile by Microsoft. Motorola hopes to introduce an Android-supported smartphone in time for the Christmas buying season in 2009. It also plans to announce other smartphones using Windows Mobile next fall.
“The reality is, there is no good fix here,” he said. Mr. Jha was chief operations officer at Qualcomm, the maker of chips used in cellphones. He oversaw Qualcomm’s research and development, including its Flarion unit, the maker of fourth-generation wireless technology that makes it easier and faster for users to surf the Web on their mobile phones.
Motorola, based in Schaumburg, Ill., said it lost $397 million, or 18 cents a share, in the third quarter, compared with a profit of $60 million, or 3 cents a share, a year ago. Sales fell 15 percent, to $7.48 billion, from $8.81 billion a year ago. Net cash was $3.4 billion, compared with $3.6 billion in the second quarter.
The mobile devices division was the hardest hit. Sales fell 31 percent, to $3.1 billion, from $4.5 billion a year ago. The division reported an operating loss of $840 million, compared with a loss of $248 million in the quarter a year ago. Mr. Jha said the division planned to cut $600 million next year, or about three-quarters of the overall $800 million in cuts planned companywide.
The company began the year with 66,000 employees, but according to government filings, 4,800 employees affiliated with Motorola were laid off in the first nine months of the year.
“In the end, they still have to come up with well-designed phones,” said Roger Entner, a communications analyst at Nielsen IAG. “I think Sanjay is finally realizing what a mess the organization is in.”
By choosing to use Android and Windows Mobile, Mr. Entner said it showed that Mr. Jha “had zero faith” in the proprietary operating system that Motorola used for some of its phones. He added that while Motorola was long known for its innovative hardware design, its software design was considered a laggard.
Windows Mobile, though, has often been blamed for not fostering innovative mobile devices. Mr. Jha conceded that the current iteration of the operating system “could be better,” but said he had seen previews of newer versions and was encouraged that they would be more consumer-friendly.
Motorola plans to open an office in Silicon Valley to be near Google engineers and another in Seattle to work more closely with Microsoft. Motorola also makes set-top boxes and products used by businesses and law enforcement officials for scanning and fingerprinting, as well as data and video communications systems for public agencies like fire departments. It is the more profitable side of the business.
Last spring, Motorola announced it would separate its mobile phone business from the rest of its operations in 2009. But the company has called off plans to do so next year, in part because of the weak economy.
The company also said it lost $141 million in its Sigma Fund, an institutional m
oney market fund, because of faltering investments in, among others companies, Lehman Brothers and Washington Mutual.
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