Motorola Inc. posted a massive fourth-quarter loss Tuesday as it recorded charges to reflect the dwindling value of its cell phone business. The maker of telecommunications equipment also suspended its dividend and announced the departure of its chief financial officer.
Its stock tumbled 11 percent.
Motorola lost $3.6 billion, or $1.57 per share, in the fourth quarter.
Excluding charges it took for goodwill impairment and an increase in its deferred tax reserves, the Schaumburg, Ill.-based company lost 1 cent per share. Analysts polled by Thomson Reuters expected Motorola to break even on that basis.
In the same quarter of 2007, Motorola earned $100 million, or 5 cents per share.
Motorola's sales in the fourth quarter were $7.14 billion, down 26 percent from the year-ago period.
Motorola gave no reason for the departure of CFO Paul Liska, who was appointed last February. Edward J. Fitzpatrick, senior vice president and corporate controller, will be acting CFO while the company searches for a permanent replacement.
Co-chief executive Greg Brown said Liska had done a good job preparing the cell phone business for a spinoff. However, the spinoff was postponed last year as the unit's sales declined further.
"I think the business environment's changed, and given the environmental changes, we thought the change was appropriate at this time as well in this position," Brown said.
Liska could not be reached for comment; his phone number at Motorola was not in service Tuesday.
Motorola is on a mission to cut costs by $1.5 billion this year, mainly from the cell phone division. It announced 4,000 job cuts in January, in addition to 3,000 it announced in October.
Company officials declined to state the impact of the cost cutting on Motorola's Home and Network Mobility operations in Tempe, the firm's primary remaining unit in the Valley, saying they did not break it out by location.
Even with those efforts, Motorola forecasts a loss of 10 cents to 12 cents per share for the current quarter, excluding charges. Analysts had expected a loss of 6 cents per share.
"Something is going on - the guidance is much worse than expected, which seems to imply that actions they're taking are not enough in the short term," said analyst Pablo Perez-Fernandez at Global Crown Capital. He predicted that the company, which generated cash in the latest quarter, will start burning through it later this year.
The elimination of the dividend is a sign of the company's need to conserve cash. Motorola most recently paid a 5 cent quarterly dividend, for an annual yield of about 4.4 percent. It paid out $453 million in dividends last year.
"Dwindling cash reserves ... are going to tie the company's hands down in its ability to restructure effectively," Perez-Fernandez said. "We need clear indications from Motorola what it is going to do to turn around the company."
Its stock fell 50 cents, or 11 percent, to $4.04 in morning trading Tuesday after the earnings release.
Motorola sold 19.2 million cell phones worth $2.35 billion in the quarter. That's less than half the number of units it sold in the fourth quarter of 2007. But Motorola had warned of the decline in January.
The cell phone unit is struggling both with a loss of market share and a decline in the overall market, as the economic malaise weakens consumer appetites.
The head of the cell phone business, Sanjay Jha, said Motorola will aim to produce hit smart phones, taking up the challenge of matching Apple Inc.'s iPhone and Research in Motion Ltd.'s BlackBerrys. It will focus on using Google Inc.'s Android software, letting Microsoft Corp.'s Windows Mobile take a back seat, at least until the new version of Windows arrives next year.
Motorola announced in March that it would spin the cell phone business off into a separate publicly traded company sometime in the third quarter this year. In October, it postponed the spinoff and didn't set a new target date. There was no update on the spinoff Tuesday. Executives said they remained committed to the idea but did not say when it would become reality.
Motorola's non-cell phone units, which comprise two-thirds of sales, posted earnings increases.
Home and Networks Mobility, which makes cable TV set-top boxes, modems and related gear, saw its operating earnings increase 34 percent to $257 million, on $2.6 billion in sales.
Enterprise Mobility, which makes police radios and other communications equipment for organizations, posted operating earnings of $466 million, up 3 percent, on sales of $2.2 billion.
For all of 2008, Motorola lost $4.16 billion, or $1.84 per share. In the previous year, it had lost $49 million, or 5 cents per share.
Sales in 2008 were $30.1 billion, down 18 percent from the year before.