Motorola delays breakup, cuts jobs

October 30, 2008: 11:30 AM ET

By Scott Moritz

Motorola on Thursday said its plan to break up into two companies is on hold, leading the head of its mobile phone business to outline a new plan for reviving the company's ailing handset business.

Part of the restructuring plan includes the loss of 3,000 jobs, most from the mobile phone division, a company representative confirmed.

Motorola (MOT), which reported third quarter earnings that beat profit estimates but missed sales targets, said the split up called for by activist investor Carl Icahn will not happen in the third quarter next year as planned. Icahn wasn't immediately available for comment.

Motorola was down 5% Thursday and has seen its stock fall 72% in the past year as the lack of a successor to its once-hot Razr phone wiped out its sales volume and profits amid a declining economy.

Sanjay Jha, who took over as head of the handset business in August, blamed the economy, the credit freeze and "changes underway" in the mobile phone unit for the breakup delay. Analysts have been critical of the costly breakup plan, seeing it as a distraction that failed to address the underlying problems at the world's third-largest phone maker.

On a conference call with analysts after earnings were announced, Jha said the company would cut the total number of phones models it produces next year and focus less on its own mobile operating system in favor of systems developed by other companies, including Google's (GOOG) Android and Microsoft's (MSFT) Windows Mobile.

Some analysts who have been critical of the company welcomed the new plan.

"Sanjay nailed it," said Ed Snyder, an analyst with Charter Equity Research. "It was a perfect description of the big problems facing the handset business and an intelligent plan for fixing them. Unfortunately it will be painful."

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