Motorola CFO: Vendor Intentionally Deflated Forecasts

By Tara Seals

A former Motorola Inc. CFO is alleging the company intentionally misstated forecasts for its mobile device business, and says he was unlawfully fired for trying to blow the whistle.

Paul Liska said in a lawsuit unsealed this week that the handset maker purposely altered the struggling unit’s internal forecasts for 2009 to be substantially lower than Wall Street was expecting. Projected unit volume was revised down 40 million units (40 percent), sales down $7 billion (47 percent), and operating earnings down $625 million (500 percent).

The division has been losing sales and revenue throughout 2008 as it struggled to keep up in an iPhone kind of world. Making it out to look like it’s doing worse than expected would better position it for a spin-off.

“The guidance seems to indicate [Motorola] either expects massive additional share loss in the first quarter or very weak revenues and margins across the board from the other segments,” one bewildered analyst wrote at the time.

Liska stated that Moto was “intentionally or recklessly, materially misstating its 2009 forecasts and strategic plan.” In the absence of a spin-off deal the artificially low guidance would affect Moto’s credit rating and could lead to the demise of the entire company, he said he warned. And when he continued to talk about it, the vendor fired him for being a whistleblower, he alleged.

Motorola meanwhile said Liska was simply fired for being bad at his job. Motorola acknowledged in a court filing that Liska had presented a presentation to board members on Jan. 28 raising concerns over the lowered guidance, but said what Liska laid out at the time was “contrived.” The company paints a picture of Liska as architecting a role for himself as a whistleblower in order to extract payment out of a company that simply fired him for incompetence.

In a filing Moto said Liska “proved himself to be erratic, unprepared, abrasive, divisive — and often simply absent and ‘unavailable.'”

Liska’s lawyer fired back: “[Motorola’s] public endorsement of Liska’s performance in order to embark upon a vicious and defamatory campaign to smear his name and reputation and distract attention from the simple fact that it fired him for doing his job.”