Motorola, Pfizer Plan Major Staff Cuts

(AP) - Both Motorola and Pfizer are planning major job cuts due to recent poor performance.

Motorola CEO Ed Zander said Friday the cell-phone maker will cut 3,500 jobs, or about 5 percent of its work force, as it moves to improve operating costs after a disappointing fourth quarter.

Meanwhile, Pfizer may announce $2 billion in cost cuts including plant closings and slashing up to 10 percent of the work force when new chairman and CEO Jeffrey Kindler announces his plan next week for a strategic overhaul of the world's largest drugmaker, according to reports.

Zander, speaking to analysts at a meeting in New York, said the move will save the company about $400 million over two years. The job cuts are to be completed by mid-2007.

The announcement came after the world's No. 2 handset manufacturer reported that fourth-quarter profits fell 48 percent despite record sales as operating results stumbled during the key holiday selling season.

Zander said a variety of factors, including missed forecasts, had resulted in a worse-than-expected quarter despite strong sales. He said Motorola is sticking with its strategy, which many analysts had said was in need of overhaul following the company's Jan. 5 profit warning.

Net profit for the last three months of 2006 was $624 million, or 25 cents per share, down from $1.2 billion, or 46 cents per share, a year earlier. Revenue was $11.8 billion, up 17 percent from $10 billion a year ago and slightly above Wall Street's $11.7 billion estimate.

Already stung by numerous patent losses, Pfizer suffered a huge blow last November when it announced it was halting development of the star of its drug development pipeline, Torcetrapib, because of patient deaths and complications.

Torcetrapib was expected to replace the revenues that will be lost when its top-seller, cholesterol treatment Lipitor, loses patent protection, which could happen in 2010. Other patent expirations will rob Pfizer of $14 billion in revenues annually between 2005 and 2007, and analysts said the company's current pipeline just doesn't have the muscle to forge major sales growth.

In the short-term all Pfizer can do is reduce costs because acquisitions and drug development take time, said Barbara Ryan, an analyst at Deutsche Bank. That's already started: Pfizer announced two months ago that it was laying off about 20 percent of its U.S. sales representatives, around 2,200 layoffs, a move analysts estimated would save between $400 million and $500 million annually.

Ryan forecast Pfizer will announce an additional $2 billion in cost cuts on Monday that go beyond the $4 billion it previously pledged to chop by 2008. She thinks the company could announce it will close at least one manufacturing plant and predicted Pfizer will lay off between 8,000 and 10,000 people, including the previously disclosed reduction in the U.S. sales force.

Bank of America analyst Chris Schott wrote in a report that Pfizer could save $800 million annually by cutting 30 percent of its international sales force, which Pfizer said includes 24,000 individuals.

Schott believes that Pfizer's pipeline, which includes products in late-stage testing to treat obesity and transplant rejection, is under-appreciated. Pfizer expects to introduce three new drugs this year, but analysts predict that only one of them, an AIDS treatment, will hit $1 billion in sales. That's why some analysts don't see how Pfizer will replenish sales lost as blockbusters' revenue gets eaten away by generic competition.

This year, Pfizer predicts its sales will be flat with 2006 levels.