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Struggling phonemaker is in for some painful changes

Google Inc. (GOOG) announced the first step in its plans to overhaul struggling recent acquisition Motorola Mobility on Monday.  As part of the overhaul it will cut 1 out of every 5 jobs at the phonemaker unit, and will close roughly 31 of the 94 offices worldwide.

I. From the First Cell Phone to Near Last

In the wireless industry there is perhaps no company with as long and rich a history as Motorola.

Founded in 1928, Motorola was a pioneer in the world of wireless communications, inventing the world's first wireless walkie talkie in 1940 and the first commercial cell phone in 1973.  It would go on to play a crucial role as an early maker of mobile devices and infrastructure.

But Motorola's problems have stretched for around a decade and a half as the golden glory of its heyday faded.

Motorola first cell
Motorola literally invented the cell phone, but almost exited the market amid failing sales.
[Image Source: Know Your Cell]

Since the late 1990s Motorola has languished, first being overtaken by Finland's Nokia Oyj. (HEX:NOK1V) and Research in Motion, Ltd. (TSE:RIM) in various markets, then later by young guns like Apple, Inc. (AAPL) and even a revitalized Samsung Electronics Comp., Ltd. (KSC:005930).  A minor hit in 2004 -- the RAZR -- quickly became another disappointment after Motorola failed to continue to push the design and feature envelope, preferring self-referential sequels.  

A friend of mine in the software industry close to the phonemaker recently told me a story of how a former Motorola executive was sent to check out a promising startup as a potential acquisition in 2009.  He returned to report that the company was of no real interest.  

Weeks later he had quit Motorola and joined the startup.  The name?  FourSquare.

Motorola had for decades attracted innovators, but sadly stories like that defection were commonplace for the phonemaker as it stumbled through a decade of disappointing earnings which eventually culminated in hard red losses.

Of all the wrong moves Motorola made, the company did make one wise bid, becoming an early adopter of the Android operating system, a move that temporarily halted its losses in the smartphone market and gave it a small breath of life.

II. Google's Restoration Begins With Fresh Blood at the Top

Now it's up to Google, makers of Android, to finish sorting out the mess.  The software giant bought a $12.5B USD "fix-me-up" in Motorola, and now it's tearing down the mildewed walls and uprooting the rotting floorboards.  And it's not afraid to start cutting close to home.

Globally Motorola employs around 20,000 folks -- about as much as RIM did at its peak in 2008.  Of those, 4,000 will now be cut.  That leaves Motorola with a workforce that will still be more than 50 percent bigger than struggling peer RIM.  The cuts will be painful, though, with around 1,300 -- roughly a third -- coming from the phonemaker's home country, the U.S.

Fixer upper
Motorola Mobility is a big fixer-upper for Google. [Image Source: HWTN.org]

Dennis Woodside, new CEO of Motorola tells The New York Times in an interview that the key to the phonemaker's revival will start with pulling out of markets where Motorola is actually losing money.  He comments, "We’re excited about the smartphone business.  The Google business is built on a wired model, and as the world moves to a pretty much completely wireless model over time, it’s really going to be important for Google to understand everything about the mobile consumer."

Google has also recruited Mark Randall, a star up-and-comer from Amazon.com, Inc. (AMZN) (and also a Nokia veteran), who is acting as Motorola's new supply chief.  He says that when he came onboard Motorola's parts chain was a mess, but that by using fewer suppliers and 50 percent less parts he will be able to substantially cut costs.

Other key additions include former DARPA chief Regina Dugan, who will lead Motorola's advanced technology group, and Vanessa Wittman -- former CFO of brokerage firm Marsh & McLennan Comp.s, Inc. (MMC) -- who now steps in as Motorola's CFO.

III. Motorola Has Some Advantages, Even Without Special Android Favors

As every analyst or foe states at every possible opportunity it should be interesting to see whether Google shows any signs of favoritism towards Motorola, over its third party Android partners.  So far Google's approach seems to mirror Microsoft's handling of partner Nokia -- to trade employees, but steadfastly avoid any sort of exclusive product or software offerings.

Motorola has some advantages going ahead.  Apple's case against it has been dismissed in the U.S., making it the first of the Android Big Three to be out of that legal nightmare.    In the features department, Motorola's phones like the RAZR MAXX hold the battery life crown, even beating Apple's perennial battery life performer, the iPhone [Source: AnandTech].

Droid RAZR MAXX
The RAZR Maxx remains king of battery life. [Image Source: Verizon Wireless]

But Motorola must not waiver from releasing high-profile flagship phones or it risks losing the publicity battle with polished market leaders Samsung and Apple -- both kings of public relations hype.

The fresh blood must deliver oxygen to Motorola's atrophying muscles.  That much is apparent after the latest quarter of losses followed by a new regiment of layoffs and cost cutting.


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The RAZR
By Theoz on 8/13/2012 1:21:55 PM , Rating: 2
quote:
A minor hit in 2004 -- the RAZR -- quickly became another disappointment after Motorola failed to continue to push the design and feature envelope, preferring self-referential sequels.


I disagree with your characterization that the RAZR was only a minor hit. At least in the US, this was a major industrial design innovation with sales to match. The keypad was quite the innovation at the time.

You're dead on with you second point however. From the Feb 1, 2008 Chicago Tribune:
quote:
Zander, then CEO of the Schaumburg-based technology giant, was riding a stupendous crest in July 2006 when he was asked what was next for Motorola after the hit Razr mobile phone. "More Razrs," he said. "It is something we are going to continue for quite some time." Competitors followed suit, turning the thin, must-have phone into a commodity now found for free.




RE: The RAZR
By JediJeb on 8/13/2012 7:08:32 PM , Rating: 2
I still use my RAZR V3 and only wish they might be really innovative again and make some sort of flip smart phone along the same size as the V3. Just remove the hump at the bottom, extend the flip all the way to the bottom and make it one big screen on the inside. Open it up and you have touch screen on one half, keypad on the other half, or even better two touch screens. Would be similar to having dual monitors on your home PC.


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