Motorola sells unit that makes cell phones
BY JON VAN
Chicago Tribune
CHICAGO -- Motorola Corp. will outsource more of its cell phone
production in a deal that will trim from its payroll 2,870 jobs held by
people in Iowa, Florida and Ireland.
The company announced Wednesday a deal worth more than $1 billion,
under which Toronto-based Celestica Inc. will take over Motorola
factories in Dublin, Ireland and Mount Pleasant, Iowa, hiring about
1,200 of the Motorola employees displaced by the shift. About 350 more
of the lost jobs will be absorbed by Motorola at other facilities.
While Motorola has no plans to withdraw from manufacturing cell phones,
it won't rule out future deals that could reduce its manufacturing
capacity, a company spokeswoman said. The Schaumburg, Ill.-based
electronics giant has Illinois-based manufacturing facilities in
Harvard and Libertyville.
Wednesday announcement reflects continuing restructuring begun two
years ago by Motorola CEO Chris Galvin intended to boost profitability
by cutting costs and focusing the company on its core competencies.
``Motorola must remain nimble in order to stay ahead of the marketplace
and grow our position as a technology leader,'' Galvin said in a
prepared statement announcing the Celestica deal.
Motorola traditionally has done its own manufacturing as well as design
and marketing of cell phones, pagers and other wireless electronic
products. But it first embraced outsourcing last spring in a five year
deal whereby Flextronics International Ltd. based in Singapore will
make some wireless products and set top boxes for Motorola.
The Flextronics deal didn't involve taking over any existing Motorola
manufacturing capacity as Wednesday's agreement does.
Celestica will pay about $70 million for manufacturing facilities
operated by Motorola in Ireland and Iowa. As part of the restructuring,
Motorola's manufacturing facility in Boynton Beach, Fla., will be
converted to concentrate on software applications. Pager care
operations there will be transferred to Motorola's facility in Fort
Worth, Texas.
Some 1,400 Motorola jobs in Dublin will be eliminated in the move, and
Celestica will offer new jobs to about 650 people there. In Iowa,
Motorola will trim 670 jobs and Celestica will offer 550 jobs to those
employees.
Of 800 positions cut in Boynton Beach 100 will be eligible to transfer
to Motorola's facility in Fort Worth and 250 more will be eligible to
transfer to the firm's facility in Plantation, Fla.
Motorola's move to outsourcing follows a widespread industry practice,
analysts said. It especially makes sense regarding consumer items like
cell phones and pagers that tend to be commodities with low profit
margins that quickly go in and out of fashion, said Bob Larribeau, an
analyst with RHK Inc., a San Francisco-based telecommunications
analysis firm.
Motorola, which makes infrastructure operating systems for wireless
phone carriers as well as the phones used by customers, may need some
help, he said.
``In general it is difficult for companies that build systems to also
build consumer products,'' Larribeau said. ``Handsets are low margin,
time sensitive items, and a lot of companies in systems outsource them.
They establish relationships with companies that are in that
business.''
Adil S. Zainulbhai, a director based in Washington with the McKinsey &
Company consultancy, said that Nokia Oy, the leading cellphone maker,
has outsourced its phones for a long time.
``When they had high demand for a phone, they had others who had
capacity make them,'' Zainulbhai said. ``It made more sense than trying
to ramp up their own capacity quickly.''
Helsinki-based Nokia has supplanted Motorola in recent years to lead
the cell phone market.
Pascal Aguirre, a vice president with Adventis, a Boston-based
consultancy said that Motorola's move is sound.
``It is never too late to do the right thing,'' Aguirre said. ``It's
not only right for handsets, but for chip manufacturing, data
networking and other areas. Companies like Motorola should focus on
R&D, product development, sales and marketing and let others worry
about manufacturing.''
A Motorola spokeswoman, Margot Brown, said that outsourcing enables a
firm to ``smooth out the peaks and valleys of demand.''
``What we've been telling people since 1998 is that we're really
looking at how to do things differently,'' she said. ``This is another
example of that. There are no plans to exit manufacturing, but we want
a balance of inhouse and outsourced capacity.
``We don't rule out doing more of this where it gives us a competitive
advantage.''
The Celestica deal is expected to close early next year. Motorola has a
worldwide workforce of 130,000. Its stock closed at $17.81 cents
Wednesday, down $1.19
BY JON VAN
Chicago Tribune
CHICAGO -- Motorola Corp. will outsource more of its cell phone
production in a deal that will trim from its payroll 2,870 jobs held by
people in Iowa, Florida and Ireland.
The company announced Wednesday a deal worth more than $1 billion,
under which Toronto-based Celestica Inc. will take over Motorola
factories in Dublin, Ireland and Mount Pleasant, Iowa, hiring about
1,200 of the Motorola employees displaced by the shift. About 350 more
of the lost jobs will be absorbed by Motorola at other facilities.
While Motorola has no plans to withdraw from manufacturing cell phones,
it won't rule out future deals that could reduce its manufacturing
capacity, a company spokeswoman said. The Schaumburg, Ill.-based
electronics giant has Illinois-based manufacturing facilities in
Harvard and Libertyville.
Wednesday announcement reflects continuing restructuring begun two
years ago by Motorola CEO Chris Galvin intended to boost profitability
by cutting costs and focusing the company on its core competencies.
``Motorola must remain nimble in order to stay ahead of the marketplace
and grow our position as a technology leader,'' Galvin said in a
prepared statement announcing the Celestica deal.
Motorola traditionally has done its own manufacturing as well as design
and marketing of cell phones, pagers and other wireless electronic
products. But it first embraced outsourcing last spring in a five year
deal whereby Flextronics International Ltd. based in Singapore will
make some wireless products and set top boxes for Motorola.
The Flextronics deal didn't involve taking over any existing Motorola
manufacturing capacity as Wednesday's agreement does.
Celestica will pay about $70 million for manufacturing facilities
operated by Motorola in Ireland and Iowa. As part of the restructuring,
Motorola's manufacturing facility in Boynton Beach, Fla., will be
converted to concentrate on software applications. Pager care
operations there will be transferred to Motorola's facility in Fort
Worth, Texas.
Some 1,400 Motorola jobs in Dublin will be eliminated in the move, and
Celestica will offer new jobs to about 650 people there. In Iowa,
Motorola will trim 670 jobs and Celestica will offer 550 jobs to those
employees.
Of 800 positions cut in Boynton Beach 100 will be eligible to transfer
to Motorola's facility in Fort Worth and 250 more will be eligible to
transfer to the firm's facility in Plantation, Fla.
Motorola's move to outsourcing follows a widespread industry practice,
analysts said. It especially makes sense regarding consumer items like
cell phones and pagers that tend to be commodities with low profit
margins that quickly go in and out of fashion, said Bob Larribeau, an
analyst with RHK Inc., a San Francisco-based telecommunications
analysis firm.
Motorola, which makes infrastructure operating systems for wireless
phone carriers as well as the phones used by customers, may need some
help, he said.
``In general it is difficult for companies that build systems to also
build consumer products,'' Larribeau said. ``Handsets are low margin,
time sensitive items, and a lot of companies in systems outsource them.
They establish relationships with companies that are in that
business.''
Adil S. Zainulbhai, a director based in Washington with the McKinsey &
Company consultancy, said that Nokia Oy, the leading cellphone maker,
has outsourced its phones for a long time.
``When they had high demand for a phone, they had others who had
capacity make them,'' Zainulbhai said. ``It made more sense than trying
to ramp up their own capacity quickly.''
Helsinki-based Nokia has supplanted Motorola in recent years to lead
the cell phone market.
Pascal Aguirre, a vice president with Adventis, a Boston-based
consultancy said that Motorola's move is sound.
``It is never too late to do the right thing,'' Aguirre said. ``It's
not only right for handsets, but for chip manufacturing, data
networking and other areas. Companies like Motorola should focus on
R&D, product development, sales and marketing and let others worry
about manufacturing.''
A Motorola spokeswoman, Margot Brown, said that outsourcing enables a
firm to ``smooth out the peaks and valleys of demand.''
``What we've been telling people since 1998 is that we're really
looking at how to do things differently,'' she said. ``This is another
example of that. There are no plans to exit manufacturing, but we want
a balance of inhouse and outsourced capacity.
``We don't rule out doing more of this where it gives us a competitive
advantage.''
The Celestica deal is expected to close early next year. Motorola has a
worldwide workforce of 130,000. Its stock closed at $17.81 cents
Wednesday, down $1.19