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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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RE: I look forward to the day...
By TSS on 8/13/2012 2:52:03 PM , Rating: 2
Well...

I know it's going to sound strange, me taking reclaimers side, but once you consider it really doesn't matter which one of the candidates wins because both will suck, romney is the better choice. But not because of romney or ryan.

Consider this: From what i know of the american political structure, it's now going to be 2 years untill the next house elections, while the senate gets elected at the same time as the president. Proposals have to pass all 3 to get signed into law.

Currently, the house has a republican majority. Since the house and the senate have been controlled by different parties NOTHING has been done. NOTHING.

Shortly after the elections on januari 1st the fiscal cliff arrives. It's a perfect storm that will drive the economy into depression the second it arrives. I'm all for fiscal conservatism and running a balanced budget, but going cold turkey isn't the way to do it.

Thus the only logical conclusion is to vote for romney. When the senate and house are republican controlled the proposals will fly through and they will litteraly, save the nation from the januari 1st doom. If Obama gets re-elected, the republicans *will* stall in the house, which is time you simply do not have after the inaugeration (which was januari 20th in 2009, 19 days longer then you have now). I'll add it in here that yes, while it is a hostage situation, the democrats would do exactly the same if the situation was reversed.

Do note: I haven't said it fixes anything. By the time romney's first term is through the national debt WILL BE $20+ trillion, and $22 trillion is looking very likely if not more. It might very well be the economy collapses before his term is over because the hits you don't take in 2013 you will take in 2014. And the world's economy is no longer waiting for america to make decisions, the chinese have already made their move.

You're screwed either way, severely screwed. BUT. Reclaimer is right that with romney, you'll be screwed later, rather then sooner.

Of course i'll add the usual disclaimer that i think both party candidates are idiots and neither will solve anything, but will make things worse even if you cannot concieve right now how it possibly could get worse. But if that's the will of the people....


RE: I look forward to the day...
By JasonMick (blog) on 8/13/2012 2:58:06 PM , Rating: 2
quote:
Thus the only logical conclusion is to vote for romney. When the senate and house are republican controlled the proposals will fly through and they will litteraly, save the nation from the januari 1st doom. If Obama gets re-elected, the republicans *will* stall in the house, which is time you simply do not have after the inaugeration (which was januari 20th in 2009, 19 days longer then you have now). I'll add it in here that yes, while it is a hostage situation, the democrats would do exactly the same if the situation was reversed.

Do note: I haven't said it fixes anything. By the time romney's first term is through the national debt WILL BE $20+ trillion, and $22 trillion is looking very likely if not more. It might very well be the economy collapses before his term is over because the hits you don't take in 2013 you will take in 2014. And the world's economy is no longer waiting for america to make decisions, the chinese have already made their move.
Decent analysis.

I can buy that.

I guess I tend to agree with you. Still not going to change my mind about voting third party/write-in, but if I was voting for one of the two parties, sure I would probably pick Romney for similar logic as yours.

In fact, Romney might be good in another way too, in that if the deficit continues to grow and the recession drags on, then people may finally wake up to the fact that both parties are corrupt.

But I do think your depression scenario is where we will eventually headed. And this time around the U.S. federal government will be lucky to survive in its current form.


RE: I look forward to the day...
By Reclaimer77 on 8/13/2012 3:46:16 PM , Rating: 2
Also something he left out, there's possibly two Supreme Court seats coming open in the next 4 years. Do we really want Obama putting another TWO unqualified radically activists judges who will uphold obviously illegal and Unconstitutional things like Obamacare for years to come?

This upcoming election is HUGE for so many reasons. I refuse to surrender in apathy and say all hope is lost.


RE: I look forward to the day...
By Ish718 on 8/13/2012 11:30:56 PM , Rating: 2
If Romney is elected, prepare to be disappointed...


RE: I look forward to the day...
By Belard on 8/15/2012 6:45:59 AM , Rating: 2
yes, because Clarence Thomas has been such a good judge. What is his record for asking questions?

How much has Koch paid for his rulings? How many hundreds of thousands of dollars has is wife made working for the Tea~ Er,I mean Koch Party?


"I mean, if you wanna break down someone's door, why don't you start with AT&T, for God sakes? They make your amazing phone unusable as a phone!" -- Jon Stewart on Apple and the iPhone














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