Motorola plans to cut 3,500 positions

Motorola Inc. said Friday that it would cut 3,500 jobs and take other steps to reduce costs after misjudgments on pricing and sales forecasts for its high-end phones contributed to its least profitable quarter since 2004.

The move came as the world’s No. 2 cellphone maker reported a 48% decline in fourth-quarter earnings, to $624 million, on a steep drop in profitability in the handset business.

Chief Executive Ed Zander announced the cuts at an analysts’ meeting in New York, saying Motorola could save about $400 million over two years by eliminating 5% of its workforce.

Facing stiffer competition from its rivals’ new products, Motorola aggressively cut prices of its phones during the quarter, especially in emerging markets, to gain market share at the expense of profit margins.

The decision to shed jobs comes after Motorola’s recent $3.9-billion acquisition of Symbol Technologies Inc., a maker of bar code scanners and hand-held computers, had increased the Schaumburg, Ill.-based company’s workforce to 70,000 from about 67,000. The cuts are to be spread across the company globally and completed in the first half of 2007.

Coupled with its prediction that it would post full-year sales of $46 billion to $49 billion, above analysts’ consensus estimate of $45.9 billion, the news sent Motorola’s stock higher despite the lackluster earnings numbers. Shares gained 56 cents to $19.27.

Earnings amounted to 25 cents a share and were down from $1.2 billion, or 46 cents a share, a year earlier, when profit was boosted by a large gain from a legal settlement. Excluding certain items, Motorola said, earnings from continuing operations were 21 cents a share.

Revenue was $11.8 billion, up 17%.

For the full year, earnings were $3.67 billion, or $1.46 a share, down 20% from $4.58 billion, or $1.81, in 2005. Sales rose 22% to $42.9 billion.