Tuesday 5 February 2008

Bye Bye Moto...

Well its nearly time to say Bye to Motorola as they are planning to sell off (or merge perhaps) their Cell Phone business.

Guardian has an interesting peice on this:

Such a move could reshape the global mobile phones industry, leaving the rump of Motorola to concentrate on radios, networking equipment and household electronics such as television set-top boxes.

Although renowned for its ultra-thin Razr phones, Motorola has been losing market share; it slipped from second to third place in the world last year, behind Samsung and the industry leader, Nokia.

Motorola has been facing break-up calls for more than a year from the billionaire shareholder activist Carl Icahn, who owns 3.3% of the stock and sought boardroom representation last year.

Icahn greeted the announcement with satisfaction: "For many months I have been publicly advocating the separation of mobile devices from Motorola's other business and I am pleased to see that Motorola is finally exploring that proposal."

He warned, however, that he intends to try to unseat four or five of Motorola's 13 board members again at this year's annual meeting: "We believe Motorola is finally moving in the right direction but certainly still has a long way to go."

Motorola's profits slumped by 84% to $100m (£50m) in the final quarter of 2007. Although the Razr has surpassed 50m sales worldwide, the company has failed to follow up the model's success with a broader range of popular handsets.

Analysts have suggested that its technology neither suits burgeoning demand for multimedia functions in Europe and America nor the pressure for low prices which prevails in developing countries.

Motorola's announcement followed speculation of a sale of its phones division in a note published by an analyst at Nomura, who suggested that a Chinese buyer may be interested in the business.

Motorola's mobile phones division accounts for about half of its $36bn global sales. But its 12% share of the phones market is just half of its level at the peak of the Razr's success in 2006.

Regarding a takeover, Businessweek says:

A big reminder of the difficulties is the collapse of the highest-profile attempt by an Asian company to acquire a struggling Western cellular brand. In 2005, the Taiwanese electronics group BenQ, which had won respect in the telecom and computer industries for its innovative design and was making headway establishing its brand worldwide, tried to jump-start its global push by buying the struggling handset unit of Siemens (SI). The deal proved far too big for the Taiwanese company, though, and in 2006 BenQ Siemens went bankrupt.

As BenQ's experience illustrates, in the fiercely cutthroat handset market, a misstep could push a manufacturer way behind rivals, and achieving synergies could take time. A foreign takeover would probably involve the headache of integrating vastly different operations and clashing cultures, which could discourage any potential buyer from courting Motorola, particularly when its existing strategies are working. "It could be a dangerous undertaking," says Michael Min, a specialist on information technology companies at fund manager Tempis Capital Management.

Tomi Ahonen wrote an interesting comment on forum oxford on this one:

I'd hate to see Motorola quit the handset business, but its a very difficult market to succeed in. The mobile phone handset is the most complex piece of consumer electronics, the market place tolerances are tiny - with a shelf life for a given model of under a year (often under 6 months) - you have to continue to deliver hit models several times a year, every year.

We've seen giants quit. Philips was the world's largest consumer electronics firm in the 1970s and 1980s and quit the phone business. Siemens was the world's largest engineering company, also made phones; no more. Ericsson was the biggest telecoms manufacturer and couldn't sustain the losses of its handset division to merge it with that of Sony - which at the time and since the 1990s was the world's largest consumer electronics company. It took them years to turn their joint venture around.

We have giants from all sides playing in this game. Motorola the inventor of the cellular phone is now quite seriously considered to be on the way out.

Then there is the paper and rubber maunfacturing company from Finland, Nokia that got into phones that is now the giant. And two other conglomerates from South Korea, Samsung and LG, that are gobbling up market share..

A very rough market place. I do love competition. Americans are good at competition. I also love history, and it seems like a cruel twist of fate, if Motorola were to exit. But they haven't done really anything impressive since the Razr. And for a giant of their size, that is pretty sad...

Lets see how it plays. I often hear the big investor analysts say when they look at our industry, that there are too many players, and the market has to consolidate. It seems surprising when the news arrives of the Alcatel-Lucents, Nokia-Siemens Networks, Sprint-Nextels and SonyEricssons etc.

Meanwhile on another front we also see Microsoft wanting to gobble up Yahoo..

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