Is this the end game, or just stage one of an eventual fire sale?
Today Motorola did the honourable thing and spun off its disastrously performing handset business to create two independent, publicly-traded companies. The decision comes following the company's 31 January announced structural review.
"Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors," said Greg Brown, Motorola's tanned president and CEO. "Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus - as well as more targeted investment opportunities for our shareholders."
I think Nokia might have something to say about that 'industry leading' part.
"Our priorities have not changed with today's announcement," stressed Brown. "We remain committed to improving the performance of our Mobile Devices business by delivering compelling products that meet the needs of customers and consumers around the world. As part of that effort, we have undertaken a global search for a new chief executive officer for the Mobile Devices business. We believe strongly in our brand, our people and our intellectual property, and expect that the Mobile Devices business will be well-positioned to regain market leadership as a focused, independent company."
The separation "if consummated" (*hint, hint*) will take place in 2009 should a buyer/sucker not be found in the meantime...
Update: A hugely revealing letter from Numair Faraz, former adviser to tragic ex-Motorola CMO Geoffrey Frost address to Greg Brown has surfaced online and here it is in its entirety. And yes, it is everything you might have expected...
After making repeated attempts to contact you via your office, I am forced to write this open letter to publicly air my grievances concerning Motorola.
As you may or may not recall, I was the young person who worked with Geoffrey Frost during his days as CMO of the company. I was the one quoted in Forbes in 2003 as saying "Motorola's biggest problem is that Samsung kicks ass," and helped Geoffrey in his efforts to revamp the company's mobile lineup -- an effort that eventually lead to the creation of the RAZR. As I told the company's senior designers at Motorola's 75th anniversary meeting: create something cooler and more expensive than anything else out there, and everyone will want it.
After the success of the RAZR, I implored the company to beef up their software expertise, and focus on creating socially networked devices (this, in the era before MySpace and Facebook became the juggernauts they are today). Your predecessor, Ed Zander, had little interest in this, and instead proceeded to prop up Motorola's stock price by parlaying his friendship with Steve Jobs into the ill-fated ROKR effort. Zander, who seemed to care more about his golf score than running one of America's greatest corporations, left all of the hard work to Geoffrey; I've always considered it Motorola's dirty little secret that their entire profit machine and strategy was run by their CMO -- not the rest of the company's executives, who are as inept as they have ever been.
Many believe Ed Zander worked Geoffrey to death, putting the pressure of the fate of the company in his hands. I took his untimely death in 2005 very badly, and knew that the company would head downhill in the aftermath. Ed Zander continued to reap the dividends of Geoffrey's work, and the company made billions in profit from overselling the RAZR. Instead of channelling that money into the obvious -- you know, further development of consumer devices -- Zander purchased enterprise companies such as Symbol, and engineered massive stock repurchases.
As I told Zander in a phone call in 2007, I felt that he was setting the company up for massive failure. He had the audacity to say "well, maybe Geoffrey should have come up with a better successor to the RAZR," and told me to "wait for big things in 2008." I guess he was right -- he got a big golden parachute, and exited out of the company. Your appointment to the position of chief executive gave me cause for hope, and I reached out to you; I knew you were one of the main drivers behind the enterprise acquisitions, and that you had zero expertise in consumer devices. Surely you could use some help in turning that business around?
It really angers me to see that you're really no different from the rest of the incompetent senior executives at Motorola -- but instead of merely being incompetent, you killing the company. Your lack of understanding of the consumer business doesn't give you a valid reason for selling the business; moreover, publicly disclosing your explorations of such a move, in an attempt to keep Carl Icahn off your back, shows how much you value the safety of your incompetence. You have no interest in fighting the good fight and attempting to mould Motorola into the market leader it can and should be; taking control of the handset division, as you have recently done, will accomplish very little -- it will simply give you an ability to say "we tried our best" when you finally cart the business off to the highest bidder.
In order to turn the handset division around, you need to bring in another Geoffrey; someone worldly and dynamic who is more interested in success than their corporate career. You need to task the company's designers with the same mantra that created the RAZR -- make me a phone that looks, feels, and works like a symbol of wealth and privilege. Recognize the superiority of American software, and bring back those jobs so irresponsibly outsourced to China and Russia. Fully embrace embedded Linux and Google's Android initiative, and take the phone operating system out of the stone age. Recognize that, while rich people don't really know what they want, the lower end of the market does -- and fund the development of an online "crowdsourced" device design platform to take advantage of this fact. Get rid of all of your silly, useless marketing, including those overpriced and completely ineffective celebrity endorsements, and do one solidified global campaign with Daft Punk (the only group whose global appeal extends from American hip hoppers to trendy Shanghai club kids to middle-aged Londoners). Understand that the next big feature in handsets isn't a camera or a music player -- it is social connectedness; build expertise in this area, and sell it down the entire value chain.
I've been there when Motorola's handset division was brought back from the brink of death 5 years ago; follow my advice, and we can do it again.
Maybe it sounds like I take the downfall of Motorola personally; I do. It was my experience at Motorola, with people like Geoffrey and all of the loyal employees who still remain, that taught me that Corporate America can and should be; now, with people such as Zander and yourself, Motorola symbolizes the worst of Corporate America. As an immigrant, and someone who has traveled all over the world, I really do appreciate the uniqueness and importance of the American culture of creativity and ingenuity; whereas other countries back their money on gold and commodities, we back ours on our ability to invent the future. As an American, I believe that the protection of this culture is more important than anything else -- as such, I feel it necessary to publicly shame you and your incompetent executive team. The failure of Motorola as an American institution of creativity and innovation, should you let it happen, will be entirely of your doing. Hopefully you'll keep that in mind while relaxing with your golden parachute.
Motorola Spins Off Handset Business
Is this the end game, or just stage one of an eventual fire sale?