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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 Reclaimer77 on 8/13/2012 3:36:55 PM , Rating: 2
quote:
However, you're quite naive if you believe lowering the corporate tax rate, income tax rate, capital gains tax rate, etc. will somehow lure those who use tax shelters (like Romney) out of regions where they pay virtually no taxes.


Oh my god.../facepalm

Jason taxes and tax shelters are not our problem. The simplest way to shrink the economy in this country is to increase Government spending. If people would just understand this simple fact, we would be a lot better off. By vastly increasing the spending and size of the Government, Obama has depressed economic activity and hampered growth. The Government doesn't have money, it TAKES it's money from us.

This absurd notion created by the Left that the majority of this nations wealth is hidden in "tax shelters" is the biggest joke ever!

Obama understands this, which is why he renewed the "Bush tax cuts" in the first place. Tax increases ALWAYS depress economic activity, while tax decreases do the opposite.

If Romney cut those taxes, which lets be clear we have no idea he actually will, I'm hard pressed to see how that could be a bad thing. Provided spending levels are reduced from what they are now.

Do you wanna starve the bear or not?

quote:
Oh I'm not claiming that Romney was in charge of outsourcing, but what is true according to the link you sent me was that he maintained direct financial ties to firms that outsourced heavily.


So? I'm sure you're aware of how investment firms work. Obama comes along, and all of a sudden they are the devil incarnate.

Investing in companies who might be outsourcing jobs, is a far cry from saying someone personally "shipped jobs" oversees.

As an investment firm, their responsibly is to make the best investments for a return as possible. Discriminating between companies who may or may not be outsourcing would be, frankly, unethical and contradictory.

And I have a feeling you knew all this before hand, which made it really grating to see you repeat this kind of crap in an attack on Romney.


RE: I look forward to the day...
By JasonMick (blog) on 8/13/2012 4:03:56 PM , Rating: 2
quote:
Jason taxes and tax shelters are not our problem.
It is part of the problem and there's one and only one solution -- a flat tax on all forms of income with zero exceptions.

Any other system can and will be manipulated.
quote:
. The simplest way to shrink the economy in this country is to increase Government spending.
I agree with you here.

The problem here is that neither party's platform I feel really fixes the underlying mechanical issues.

What forms of spending arguably help our country really need to prosper? In my mind:
1. Education -- funding for university research, college loans (or better yet, free tuition for technical professions) funding for K-12.
2. Homeland defense in the form of modern fighting equipment.
3. Basic supports for responsible folks who are temporarily out of work, but are seeking employment.
4. High speed transit, highway maintenance
5. A courts system
6. Basic foreign intelligence
7. Mild market regulation (e.g. SEC).
8. A unit of currency.
9. Public healthcare, implemented on a regional (as in several smaller states per jurisdiction).

What don't we need?

1. Tax refunds -- to anyone. You should pay a flat rate, no refunds.
2. Overseas foreign aid payments.
3. Out of control defense program budgets.
4. Welfare abuse (e.g. people with 7 children on years of welfare)
5. An alphabet soup of redundant intelligence agencies.
6. The majority of overseas military bases.
7. Venture capitalism (note this is different from funding university research, and much more expensive).
8. Occupations of foreign regions.
9. Medicare/social security -- put in place national healthcare requirements on a STATE level (not a federal level) and there's not need for medicare; people can save for their own retirements.

Institute a flat tax of corporate sales (not profits/revenue, which can be hidden more easily). Institute a second flat tax on all forms of personal income.

Hold a national caucus on wording an equal rights amendment, and pass it, eliminating the need for the equal rights act, and strengthening Constitutional protection of all Americans' freedom.

Outlaw PACs, corporate donations, union donations. Only allow capped direct individual campaign donations. Allow up to four candidates to run for president, regardless of party affiliation, based on a single national primary race.

Institute a 50 percent inheritance tax, and use that to pay for college tuition for all students capable of attending for technical majors (engineering, accounting, chemistry, medicine, etc.). Liberal arts would not be covered, as they are traditionally the realm of the wealthy, and can be studied by those with money to burn on idle pursuits.

If you notice neither party would endorse my spending platform I lay out here. But it's a common sense platform.


By JasonMick (blog) on 8/13/2012 4:07:10 PM , Rating: 2
quote:
9. Public healthcare, implemented on a regional (as in several smaller states per jurisdiction).
To be clear, I think that health care should only be implemented after a Constitutional amendment, clarifying its status.


RE: I look forward to the day...
By JediJeb on 8/13/2012 6:54:14 PM , Rating: 2
quote:
Outlaw PACs, corporate donations, union donations. Only allow capped direct individual campaign donations. Allow up to four candidates to run for president, regardless of party affiliation, based on a single national primary race.


In a sense doing away with political parties where it comes to elections. That I can whole heartedly agree with. Needs to be implemented for Congress also.


RE: I look forward to the day...
By Belard on 8/14/2012 12:03:44 PM , Rating: 2
quote:
Outlaw PACs, corporate donations, union donations. Only allow capped direct individual campaign donations.

I'll give you one better.

Besides all PACS should be illegal. They allow foreigners to effect our laws. No matter what, corporations are NOT people.

There are NO direct donations to ANYONE, period. Anyone who is running for office has to file proper paperwork, get signatures, etc.

Once they qualify at various steps, they get campaign funded from a general budget. By all means, anyone CAN donate to the political process, but its given to all candidates. All would have the same budget to work with.

This will do many things that would make things wonderful.
A) Election process is shorter, faster - less time for BS.

B) Candidates are on equal campaign footing.

C) Once someone is in an office, they can spend almost 100% of their time DOING the job. Instead of 50~70% doing parties and asking for campaign donations. Sorry, when someone *GIVES* $100 million to a campaign - you KNOW they are asking for something back.

D) Nobody stays in Congress or the Senate forever! 3-terms max.

E) Any and ALL meetings with a lobbyist (most are bad, but some are good) are open to the public. ie: The meeting is recorded and available for anyone to review.

This won't happen. There is too much money tied into our government to prevent this from happening... anytime soon. :(


By Reclaimer77 on 8/14/2012 1:44:11 PM , Rating: 2
Jason not that I disagree with your points, but I'm confused. You felt the need to slam me for supporting Romney because you don't think he can magically "fix" the country and implement your suggestions? Do you honestly think ANY candidate at this point could do these things with the Congressional atmosphere we have now?

quote:
It is part of the problem and there's one and only one solution -- a flat tax on all forms of income with zero exceptions.


But taxes only make up about a third of the Governments funding. Which I might add, should be more than ample to fund a country twice this size if managed sensibly. By focusing on taxes, you're unknowingly buying into the Democrats position that the spending is fine, just things like the Bush Tax Cuts got us here. And that if we just raised taxes, we could sustain the path we're on. It's an outright lie.


RE: I look forward to the day...
By wempa on 8/14/2012 12:38:38 PM , Rating: 2
quote:
The simplest way to shrink the economy in this country is to increase Government spending. If people would just understand this simple fact, we would be a lot better off. By vastly increasing the spending and size of the Government, Obama has depressed economic activity and hampered growth. The Government doesn't have money, it TAKES it's money from us.


I totally agree that the size of the government is out of control and needs to be reduced. However, both sides are still part of the problem. To sum it up: Democrats love entitlements and Republicans love war. It's absurd to refuse to budge on the defense budget when there is obviously fat to trim there too. Let's start by closing some of the bases we have in the 100+ countries and eliminating a lot of the foreign aid we pay. I'd much rather put that money to use here in our country.


By Reclaimer77 on 8/14/2012 1:59:33 PM , Rating: 2
Wempa we could eliminate the entire Department of Defense, that's EVERY CENT we spend on the military, and have a trillion dollar budget shortfall. Next year when Obamacare kicks in? Make that TWO TRILLION.

Now I'm not apposed to some military cuts, but let's just be realistic here. Okay?


"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation














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