Motorola Drops Call on Cellphone Division

Motorola is finally waking up and facing reality as their current CEO mulls selling of Motorola's cell phone division responsible for half the companies sales.  The writing has been on the wall for Motorola to either merge or get out of cell phones since 2000. 

Motorola opted for glitz and glam to keep the company afloat for several years, but the party on borrowed time is over.  This is no surprise to insiders either at Motorola.  I happen to know from working at Motorola where I drafted a report in 2000, recommending a merger with Microsoft.

Click HereInstead Motorola chose to try and tread water, barely emerging from a technical bankruptcy in 2001 to clean house after the sale of the Paging business and their manufacturing capabilities and real estate. 

The problem is that the belt tightening of the time, pushed out a large number of the talented people that would later be needed to come up with some great products.  The good people that did stick around brought to market the RAZR, but a culture of individual heroism within the ranks exhausted the team and prevented the potential for a follow up to the RAZR.  Meanwhile Nokia and Samsung and then Apple spent a fortune getting better, much much better.

Motorola has 3 practical and positive choices and 1 additional but negative choice:

  1. Sell off to Microsoft their cell phone division and technologies, if Microsoft will have them.  Microsoft would be very smart to demand the whole company and pick up the other consumer electronic products and home networking products, while selling the government and infrastructure business to Nortel run by passed over CEO Mike Zafirovski, a person whom I respect immensely.
    1. Update - This one looks twice as likely a couple hours later after it was made public that Microsoft is bidding over $44 billion for Yahoo!, which is more than a 62 percent premium on Yahoo!'s stock price.
    2. Keep in mind that Bill Gates was schooled by Warren Buffet in investing in companies with high asset values and low prices.  That fits for Motorola and it fits for Yahoo! and Microsoft will need both to compete against Google.
  2. Sell off just the mobile phone business to Google, who is looking to build out their monopoly in search to cover mobile devices and planning to launch an iPhone competitor, possibly killer.  Having  a stable of additional cellular products not to mention the technology free of licensing fees to power them.
  3. Sell off to Samsung (farfetched) so that Samsung can continue to grow its own mobile phone business and compete with Nokia and LG more directly.

Alternatively, Motorola is looking at repeating what they did with their Paging division.  Offering their technology up for sale under licenses, and failing to find a market for that taking nothing at all except for the potential to sell some valuable Chicago real estate during the worst real estate market history since the Great Depression.

I wouldn't want to be the person that has to make the call to Motorola's real estate agent.  "You want to sell what?  You want to sell it ASAP?  You need how much cash for it?  You'll throw in a mothballed state of the art plant in Harvard Illinois complete with cows?" 

Regardless what happens, Motorola is going to witness a massive lay off of employees, they are likely to sell even more real estate and this company pushing 80 years old is going to close down another business in an industry that they created just like they did with car radios, televisions, home stereos, and pagers.

Their biggest problem looking past cell phones is that their other lines of existing business outside of government and infrastructure, are doing business but just like in the cell phone business they are not breaking new ground at the rate their competitors are moving forward.  Motorola has to do something very fast to save these lines of business and a proxy battle with Carl Icahn is only going to slow things down.  Icahn may win that battle this time, but he's likely to end up with a company completely behind the times and very low on cash.

Motorola's only option is to sell to a company with deep pockets, a great deal of cash and a very strong need to compete in the mobile device market. 

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