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Motorola’s continued reliance on the RAZR range of handsets and their similar cousins have seen their profits drop precipitously, spurring 3,500 job cuts.

Motorola, the worlds second biggest mobile phone maker (first being Nokia) has announced that its operating profits fell by more than half and its gross margin fell by £52.7m in Q4. The company is cutting 3,500 of its 70,000 jobs this year in a bid to save over £200m over two years. This will lower its corporate cost structure by £201 million by the end of 2007. The jobs will be cut mainly from an internal reorganization of the networks and enterprise group, and from overlapping general and accounting positions found in Motorola's recent acquisitions of Symbol Technologies and Good Technology.

Motorola agreed in September to pay £1.9billion to acquire Symbol Technologies, a maker of portable bar-code scanners, and announced in November it would buy Good Technology, a producer of mobile e-mail software. Together, the deals added about 8,000 people to Motorola, so these cuts will help ensure that the company maintains a constant headcount.

The fall in profits noted by Motorola was apparently due to a weakness in handset business, which is surprising seeing how well Nokia performed in the marketplace.

Nokia reported a Q4 net profit of £0.7billion, down 1 percent from a year earlier. Fourth-quarter sales grew 9 percent to break £6.5 billion for the first time, at £6.75 billion.

Following Nokia, Motorola is the world's second-largest wireless handset vendor, with sales rising 47 percent to 65.7 million units in the fourth quarter alone. That helped to push Motorola's quarterly revenue to £5.94billion, up from £5.05billion for that period last year.

But the company's profit sank sharply, from £0.6billion last year to £314 million for the fourth quarter of 2006. Motorola met analysts' expectations of £0.12per share.

Motorola gained its strongest revenue during the quarter from sales of the popular RAZR and KRZR mobiles.  These handsets pushed the company to produce £3.9billion in revenue, up 19 percent from the same quarter last year

Motorola has had some success with handsets in recent years since launching the super-slim RAZR range in 2003 as a high-end handset before it seeped into becoming a popular mid-range device. In the third quarter of 2006, the company's shipment growth of 38.8% was second only to Sony Ericsson while overall handset shipments of 53.7 million were second to market-leader Nokia on 88.5 million.

More recent handsets have sold less well as other players jumped onto the super thin trend that the RAZR started. Motorola has also suffered from high return rates for their handsets; the iTunes enabled ROKR released last year was something of a flop and was reported to have return rates six times the industry norm, due to a combination of handset bugs and user interface design. Other products, such as the Moto Q, are being released into a highly competitive Smartphone market. This is likely to affect Motorola's already falling profits further. 

But Motorola seem to keep pushing out these two handsets, forgetting the fact that in time, the phones will become ‘boring’ to the public, as manufacturers are producing more and more unique designs every month.  The likes of the RAZR and KRZR have no chance against phones such as the new iPhone, which is set to storm the mobile marketplace.

Nokia took an unusual turn early this month by announcing their new N76, a phone which bares remarkable similarities to the Motorola ‘V3’. Although Nokia are the world’s biggest mobile phone maker, they decided to use a design already available to the public, a design which seems to have already pulled Motorola down.