Motorola cuts global budget $250 million

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Motorola is cutting its global ad budget by more than 70%, lopping off at least $250 million in planned ad spending, according to a person familiar with the situation. The tech giant becomes the first blue-chip marketer this year to make such a drastic move as the economy continues to unravel.

Motorola, the world's No. 2 wireless handset marketer, is scaling back what had been expected to be at least a $350 million global brand campaign after consolidating its ad account at WPP Group's Ogilvy & Mather Worldwide, New York, last September.

The company is now expected to spend less than $100 million this year on combined global brand and retail-oriented advertising efforts, according to the individual. The move comes as struggling Motorola last week announced it will cut an additional 4,000 jobs, bringing the total number of job reductions to 22,000 out of a global workforce of 147,000.

Jocelyn Carter-Miller, Motorola's chief marketing officer, was not available for comment at deadline. However, Greg Nelson, corporate VP-marketing, semiconductor products sector, confirmed Motorola has cut spending on the global brand campaign, though he wouldn't discuss the size of the ad cuts.

"It's scaled back from what we were hoping to do six to nine months ago," Mr. Nelson said. "Obviously, business conditions are significantly different [now]. The semiconductor and telecommunications industries have had especially severe downturns. We have to reduce our costs, and on the other side, we have to invest in things," such as technology and marketing that will help the company to compete.

"Spending has been cut in the short term for this effort," he added, "but we hope that as the economy and our business recovers, we'll be supporting this to a much greater extent." Mr. Nelson declined to predict when such a turnaround would come.

Despite its business woes, Motorola last week launched its new brand platform, "Intelligence Everywhere," at the CeBIT trade show in Hanover, Germany and Cellular Telecommunications Industry Association trade show in Las Vegas. The Ogilvy-created platform carves out a new image for Motorola as an engineering-driven company with the brains behind technologies that make homes, cars and communications smarter.

But beleaguered Motorola is only at the beginning of what's expected to be a harrowing retrenchment, according to industry insiders. A major re-organization that began in February is likely to result in combined divisions, divestitures of some businesses and, possibly, more advertising cuts.

While hardly uncommon at big corporations, Motorola's difficulties are troubling in a culture where employees are treated like family. Current Motorola Chairman-CEO Christopher Galvin is the grandson of Paul Galvin, who founded Motorola in 1928.

"It's a difficult situation to be in; you can't cut your way to success, shrink your way to greatness," said Jeffrey Kagan, independent telecom industry analyst. Mr. Kagan noted Motorola was slow in transitioning from analog to digital wireless products and "just on the verge of launching a comeback effort, then life happens."

Motorola executives had hoped to launch a new image campaign on the Super Bowl in January, but weak economic conditions, excess inventories and slowing demand forced them to postpone the debut. A team of about 75 agency staffers worked with Motorola last year conducting global research.

Budgets have been cut to such an extent that some 50 Ogilvy employees working on the Motorola account around the world are being redeployed to other agency accounts. "The core team has to be substantially downsized," said the individual with knowledge of the matter. Motorola is said to have requested that its agency resources be protected should its budgets increase later this year.

Nils Peyron, worldwide managing director-client services and head of the Motorola account at Ogilvy, hadn't returned a phone call at deadline. Ogilvy spokeswoman Toni Lee declined to comment and referred questions to the client.

Motorola now plans to attempt a North America brand advertising launch in May. The campaign will support the "Intelligence Everywhere" concept, wireless products within its Personal Communications Sector unit and embedded technologies such as semiconductors. But the person familiar with the budget cuts noted it will be difficult for Motorola to cement its brand restaging in the near term given the constricted budget.

On Feb. 23, Motorola told analysts sales and earnings will fall below its earlier estimates due to weak orders across all its businesses. Merrill Lynch analyst Michael Ching lowered revenue estimates for the quarter ending March 2001 to $8 billion from $8.8 billion and 2001 sales estimates to $37.6 billion from $39.5 billion. Motorola's first-quarter sales last year were $8.8 billion; 2000 sales were $37.6 billion.

Contributing: Laura Q. Hughes

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