Encouraging signs

Greg Brown became CEO of Motorola at the start of 2008, at a time when the company’s handset business was in steep decline having failed to recapture the momentum generated by the introduction of the iconic RAZR handset in 2005. Almost two years into his tenure, moves are underway to separate the handset business of Motorola from the network business, and Brown sounds more optimistic about Motorola’s future than at any time in the past

Brown says Motorola will continue to focus on existing customers, 4G, and over time, public safety

If Motorola’s Q3 financial results are anything to go by, the winds of change may definitely be blowing for the Chicago-based vendor. It recorded an unexpected quarterly profit as operating losses in its mobile phone division narrowed. The results marked

Motorola’s second straight quarter of positive earnings after months of heavy losses and shrinking market share in the mobile phone business. The vendor went so far as to forecast stronger-than-anticipated earnings for the current period.

And while Q309 earnings may have only amounted to US $12 million, Motorola’s move back into the black marks significant progress as the company steadies itself from recent years of severe turbulence. Greg Brown, and later Sanjay Jha, who was appointed co-CEO of Motorola in charge of the ailing mobile devices division in August 2008, have been hard at work to restore Motorola’s reputation in the market.

Around the time of the announcement of the departure of former Motorola CEO Ed Zander in November 2007 and shortly there after, Motorola was rocked by a number of high profile departures including Stu Reed (former president of mobile devices), Padmasree Warrior (former chief technology officer), and Ron Garriques (another former president of mobile devices); and it has taken the time since that period to work towards stabilising the business once more.

In an exclusive interview prior to his first visit as co-CEO to the region in October, Brown told Comm. of his belief that 2010 would see macro-economic conditions around the world improve, and with that the fortunes of Motorola.

“I think in 2009 clearly mobile devices is in significant transition, but Sanjay and his team have been working diligently to make sure that as the smartphone market grows, particularly in 2010, that Motorola has the right product portfolio on web-based operating systems software to capitalise on the mobile Internet to make Motorola competitive and bring it back into the game,” Brown said. “And he is well on his way to doing that.”

Brown confirmed that plans are still underway for the separation of Motorola, stating that the company had made great progress on this front. “It has been helpful driving further cost efficiencies as we prepare for that separation. We have not updated any specific timing in terms of when but I expect us to do that either later this year or early next,” Brown stated.

“I think that Sanjay’s strategy around mobile devices is to get us back in the game, focussing primarily on smartphones with a rich mobile Internet experience, and I think he and his team are well on their way to establishing us on that front,” Brown added.

And given that the two businesses are very different, one being with a consumer orientation – Jha’s – and the other being a business assistance orientation, Brown thinks the industrial logic for separation remains the same. Brown is also upbeat regarding the broadband mobility solutions business at Motorola, suggesting that today he believes the company is number one or number two in the majority of the markets it serves. He said that in actuality Motorola has a very strong network business, and having done very well on the 2G side, the company has a successful partnership with Huawei on the 3G side and a leadership position in WiMAX.

“There have only been two LTE awards, of which one of the two has been awarded to Motorola,” Brown said. “And I think that we are well positioned from a technology standpoint, from an intellectual property standpoint, and we will continue forward in that regard, focussing on our existing customers, the 4G opportunity and over time, public safety.”

The economic downturn has affected all companies, and in the case of Motorola’s broadband mobility business, Brown believes it has been an opportunity for the company to re-size the business, continue to invest R&D in next generation products and innovation, and for the most part through the downturn Motorola has either held share or gotten stronger in virtually all segments that it serves there. So Brown believes Motorola is well positioned as the economy stabilises and returns to growth to benefit from its assets and distribution and participate in that recovery.

Sanjay Jha became co-CEO of Motorola in charge of the devices division in August 2008

“I think Motorola’s results to date are primarily economically driven because we are the worldwide leader in home video, we lead in mobile computer, we lead in public safety, we lead in 4G so we are a market leader or a number two player, where we have held or gained share,” Brown said. So the decline year-on-year is primarily economically driven.

Motorola intends to continue to develop its market presence outside of the US, which already counts for 50 per cent of the company’s employees. Brown believes Motorola is already well placed to participate in international growth, expecting China, Brazil and the Middle East amongst other regions to enjoy solid growth 2010.

“We have significant presence from a manufacturing, software development and distribution standpoint in all of those geographies, so I think we are well positioned going forward,” Brown commented.

Scale and supply chain efficiencies will remain a central point in Motorola’s strategy together with the delivery of overall value and staying close to customers. In many of the markets that Motorola serves, Brown believes being the leader and scale provider clearly helps from a cost standpoint as well as giving the company tremendous supply chain efficiencies over the last several years.

“As we have managed our manufacturing footprints, we have dramatically reduced the number of suppliers so that we have a better flow-through of costs that we hand onto the consumer,” said Brown.

“So I think we will be able to be competitive on the top-line as well, although it’s not only a price game, it’s a value game. And our quality continues to grow as well. I think we can compete every bit as competitively as anybody else,” he added.

From a network infrastructure standpoint, Motorola clearly believes that 4G is the number one area. WiMAX in particular has been very strong for the company, though over time LTE will also be a significant growth opportunity for Motorola.

Brown believes even the 2G business, while declining top-line, will still produce solid economic returns from an earnings and cash standpoint. Brown is also keen to reiterate Motorola’s commitment to the business in the Middle East and Africa, with the company having been present in the market as an organisation for over 40 years. Motorola recognises the exploding growth opportunities and the great potential for the vendor in the region to collectively grow.

“I think the Middle East and Africa is one of the best areas on the planet to drive continued growth. I am excited about the prospects there and am very optimistic about the opportunities for growth both structurally and for Motorola specifically going forward,” Brown concluded.