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The slumping U.S. economy is dramatically changing the game plan at Motorola’s cell phone division, which is already dangerously gushing red ink. Although Motorola’s home and network mobility division and its enterprise mobility unit pulled decent numbers in the third quarter, cell phone sales posted an operating loss of $840 million to drag Motorola into an overall loss.
In January, Motorola thought it had the answer: spinning off the cell phone division by 2009 into a separate company, as billionaire investor Carl Icahn has urged for more than a year. But Motorola co-CEO Greg Brown on Oct. 30 said that plan was dead in the water until the economy improves and the spinoff, if it happens at all, wouldn’t take place until at least 2010.
“The environment just isn’t conducive to pursuing [the deal due to the] global economy and stressed financial markets, but we remain committed to that,” Brown said in a conference call with reporters and analysts.
That leaves fellow co-CEO Sanjay Jha, who was brought in from Qualcomm in August to lead the spinoff, making a commitment to and a leap of faith with Google Android and Microsoft Windows Mobile as Motorola’s future operating systems for its mobile devices. Jha said Motorola would ditch at least four operating systems, including Symbian, to focus on developing midtier phones running Android and high-end enterprise devices operating on Windows Mobile.
The problem for Jha and Motorola is the transition will take some time. Jha predicted it would take until the third quarter of next year to bring out a Windows Mobile phone targeted at enterprises and probably until the 2009 Christmas season before a Motorola-built Android phone could hit the market.
By then, Apple and Research In Motion will have, no doubt, rolled out new iPhones and BlackBerrys targeting both the consumer and enterprise markets, swiping even more market share from Motorola. Meanwhile, Nokia, Samsung and LG Electronics will continue carving into Motorola. HTC is already producing Android phones for T-Mobile.
While Motorola still clings to being the United States’ top cell phone maker, the iconic technology company has fallen to third in global sales behind Nokia and Samsung with LG close to pushing Motorola into fourth place. Apple’s wildly popular iPhone continues to grab consumer share while BlackBerrys are the overwhelming choice of enterprises.
“The reality is, there is no quick fix here,” Jha said. “The platforms we have chosen will be capable of delivering better performance and a better experience.”
The restructuring moves will save Motorola $600 million in 2009, Jha said. Although the Wall Street Journal reported Oct. 29 that Motorola plans “thousands of layoffs” associated with the restructuring, neither Brown nor Jha would confirm the layoffs. Motorola has already announced more than 10,000 job cuts since 2007.
According to Jha, Motorola plans to establish a team in Seattle to more closely work with Microsoft, and Motorola is already working with Google’s engineers in California. For Jha and Motorola, which hasn’t had a hit phone since it introduced the RAZR almost five years ago, it’s all about the user experience.
“Windows Mobile 6 has not delivered the experience that I think Apple has been able to deliver, but as you look at the plan that is Windows Mobile 7 and even 6.5, I think there are significant new added features which will help the platform,” Jha said. “We have now targeted new teams which are focused-in California and Seattle-to deliver experiences. That is where we have to differentiate.”
Jha added there has been a “little too much focus on bright shiny objects [and] not enough focus on the user experience.”
At least that’s what Jha and Motorola hope.