RealTime IT News

Moto Assesses Its Handset Mojo

Motorola's announcement late Thursday that it's undertaking a strategic assessment of poor performing business units, specifically the handset division, for potential sale or spin-off didn't take any industry pundits by surprise.

Declining sales and failure to keep up with competitors on the product side are issues that have been dogging the Illinois-based company since it failed to push out another Razr-level success.

What is a surprise is that the vendor made it clear it would have no further comment going forward. In addition, the new CEO Greg Brown has only been on the job since Jan. 1, and typically leaders are given more than 30 days before any big decisions are announced.

The ambiguity of whether Moto will sell, spin off or consolidate business units is also a bit unexpected, one analyst said.

"[The press release] is very unusual in itself," Bill Hughes, a wireless research analyst at In-Stat, told Noting that Motorola is far from bleeding out financially, Hughes said he was concerned about the fourth quarter's earnings report but not about revenue accomplishments. The fact that Brown made it clear he was considering cost-cutting initiatives caused concern, he said.

"Motorola's culture has always been they'd rather be a big fish in a small pond, or have one home run than a series of hits on the field," Hughes said. "Executives are still wedded to this culture and it's not one that works in the cellular arena anymore."

Hughes, who spent four years at Motorola, believes success could come if his ex-employer spins off the handset division and allows it to grow under a much more innovative culture than what's in place.

But Jack Gold, principal analyst at J. Gold Associates, doesn't see success in any spin-off scenario. "It [handsets] is a huge portion of their business," he told InternetNews.com.

"It would be like cutting off their hands and legs and just leaving Motorola with its head," Gold said. He hopes the vendor takes a good look at business lines and other options before taking such extreme action.

"Once they do that they would lose credibility. I can see them divesting some businesses they've gotten into rather than cutting out their core business," Gold said.

He added that the news release was pushed out "in reaction to pressure," possibly from the board of directors or shareholders who are antsy for better stock returns. "This could be Motorola's way of saying we're doing something so back off for a few months."

The strategic review news hopefully heralds the fact that Motorola is finally assessing how to better integrate business lines and getting synergies in place, says Craig Mathias, founder of Farpoint Group, a wireless research firm.

"They've expanded and moved into some good areas but never really integrated or communicated the benefits of how everything fits together," Mathias told InternetNews.com.

"This [The news announcement] could be Motorola floating a trial balloon that they're stepping up to actually assessing strategy and looking for people to lead the strategy," he added.

While Mathias doesn't see Brown being shoved out the door anytime soon, the analyst does believe Motorola needs new leadership, whether it's a turnaround CEO type like HP's Mark Hurd or a new player like Motorola's ex-CEO Ed Zander, who spent four years at the helm before leaving at the end of 2007.

"Part of the problem is that this [the news] was likely spurred by Wall Street and the environment we live in," Matthias explained. "We think much too short-term, and we're greedy for greater profits. I'd even give money that it will be broken up, but what the spin-offs will be could be much more interesting than just the handset unit."