I haven’t said a whole lot about Motorola’s (mis)fortunes lately, apart from a post in May that echoed what I’d been saying for almost two years — that the company needed to move on from the RAZR and come up with something to replace it. But this week, the company said that it would miss its sales targets for the quarter, lose money for the second quarter in a row, and that its handset business wouldn’t be profitable this year. The dip in sales also means that Samsung has passed it as the number two handset vendor.
CEO Ed Zander (or ZNDR) is now on the chopping block, and it’s hard to see how he’ll be able to keep his job. He fended off activist investor Carl Icahn, but this latest dismal announcement may simply be too much to bear. It’s never a good sign when your company’s stock price gets held up by optimism that you’ll soon lose your job. I’ve never been a huge Zander fan, since I first heard him speak at Motorola’s press event at 3GSM in 2004. I found his vision for the company trite and tired as he trotted out the “seamless mobility” concept the company’s been talking about for ages. Perhaps Zander and the rest of the company have been too enamored with this vision of the future (which never seems to get any closer to reality) and they overlooked the short term by putting too much faith in the RAZR and its derivatives for far too long.
Things aren’t going to improve very quickly for the company, either, with most financial analysts seeing no change in its fortunes for the next 18 to 24 months, at the least. Zander has also put a new exec in charge of the handset business, and the fact that he was the company’s head of supply-chain operations makes it appear that the unit’s focus will now be on driving costs down rather than developing a portfolio of outstanding products. The problems run deep: as Techype notes, it’s no coincidence that Moto’s hurting while Sony Ericsson, which is the anti-Moto in so many ways, is thriving.
What makes the Motorola story even more compelling is that it’s got a history for this sort of thing. The story of its underestimation of the industry’s shift from analog to digital technology — which led to its ruin and the rise of Nokia — is one of the industry’s legendary tales, while the company’s history over the past decade or so has been a real roller-coaster. I wondered after 3GSM in 2006 if the RAZR was Motorola’s modern equivalent of the StarTAC, meaning a huge, hit handset that the company just couldn’t follow up. I’m sad to say that it looks like I was right.
Can Motorola turn things around? Absolutely — the Z8 is proof that somewhere within the company, somebody’s got an idea of how to make a hot handset. But I don’t think that turnaround can happen with the current leadership, nor do I think that the current leadership will be given the opportunity to do so.
Eric Jackson who started campaign against yahoo CEO has started his efforts to against Zander here http://breakoutperformance.blogspot.com/2007/07/hello-moto-plan-b-for-motorola.html
It was really mind boggling that the Street could be so wrong. It had given so much credit to Motorola’s stock on one single product. Given that most of financial analysts were using Razr and Blackberry at the time, it was more emotional than rational.
Now we have seen the similar situation again. Motorola fell out of favor. iPhone is the talk of the town, boosting Apple stock sky high.
But let’s be rational. Motorola still has a great brand in Asia, a quite good network of distribution and operator relationship. It has suffered before and will bounce back. Apple, on the other hand, is entirely untested in this industry, despite the initial success with iPhone in North America market.
Motorola has a huge stockpile of cash (about $14 billion I think) and some really massive corporate clients (American government and police services, banks, airlines etc.) and its acquisition of Symbol was inspired. It’s a good time to be buying Motorola stock at the moment. I think that the sleeping giant is dreaming-up another hit to follow the RAZR.
Hi Carlo and readers of MobHappy
Very good posting, Carlo (as per usual) and good solid analysis of the troubles of Motorola today.
I would suggest that the near future is much more bleak.
In its home market, USA, which is the only regional market where Motorola beats Nokia, it has serious problems now directly and indirectly because of the iPhone.
First, the iPhone steals directly the thunder at the top end. Secondly, the iPhone raises the bar for high-end phones - which opens the door for Nokia’s top end of N-Series and top end of E-Series. That in turn will help boost the Nokia brand (only regional market where Nokia is number 3).
Thirdly, the iPhone will also help LG, ie through the Prada phone now, and certainly soon-to-come cheaper iPhone clones in the LG Prada fashion.
The profits tend to be made at the top end models. This three-pronged attack is severely hitting the mid to top end of Motorola’s USA market, right now.
Rest of the world? Moto has been pushing low-cost phones for India, China, Africa etc, and that is a strategy for volume but not margin.
Now with this new appointment of the top guy at handsets to focus on the supply chain rather than innovation, pushes Moto’s attention more on volume, and almost gifts the mid and top end of the market to Nokia, Samsung, SonyEricsson and LG. One would think that with the buzz around the iPhone, Moto would attempt to re-vitalize its lead at the top end of the most desirable phones.
The two big problems Moto has in fighting the price wars at the low end of the market, in Africa, Latin America, India, China, parts of Asia - is that LG is very strong there and can capitalize on much lower costs of design and manufacturing in South Korea, and Nokia has about twice the global volume and plenty of handset platforms that are optimized for this low end market penetration.
Near future looks even more bleak than the near past…
My two cents
Tomi T Ahonen
http://www.tomiahonen.com