No Rescue in Sight for Faltering Motorola

Once, way back in the recesses of time, Motorola was an estimable brand, a company with popular products and a leadership position across multiple growth markets. It had solid management and board that wasn’t indifferent, too.

Today? Motorola is a smoldering ruin, under competitive siege across its core markets, losing market share almost everywhere, and afflicted by an executive team and board of directors that can’t devise a strategic plan more ambitious than breaking up the business units and divisions into bite-size morsels that can be sold piecemeal.

That’s the Carl Icahn plan, and Yahoo and its shareholders ought to take note. What’s happening to Motorola would be happening to Yahoo if Icahn and Microsoft’s Steve Ballmer had their way. We can agree to disagree on many things, but I think nearly everybody can agree that what’s happening to Motorola is a fate one wouldn’t wish on any company, particularly one that once was synonymous for American innovation and technological prowess.

Unless tomorrow’s second-quarter financial results are much better than analysts expect, Motorola is heading for the abyss. It’s almost impossible to see a sliver lining in the storm clouds above the company’s headquarters. The news is bad, and it’s getting worse by the day.

We learned today, for instance, that the company has fallen even further behind in the handset race. Whereas once, not that long ago, Motorola was a close second to Nokia in handset market share, it is now fourth, outdistanced by Nokia, well behind Samsung, and suddenly eclipsed by current bronze medalist, LG Electronics. Like a grim reaper, the number-five slot beckons.

Ten years ago, as the periodicals and history books will tell you, Motorola was the market leader.

That’s ancient history now, especially to the market analysts and investors who were hoping that a profitable handset division could be spun off in in the months ahead.

“The handset business needs to achieve profitability before it can be spun off,” said Kaufman Bros. analyst Raimundo Archibold. “Who’s going to want to own a company that’s bleeding money … We need to gain some sense the losses can be tempered.”

It doesn’t look as though the losses will slow, not until there is almost nothing left to fall off the table. Unfortunately, the losses aren’t only occurring in the handset group. Motorola employees with career alternatives are said to be leaving in droves. Recruitment of new talent is becoming a maddening, thankless task, a sure path to madness or substance abuse.

As for the rest of the company, Motorola appears to be hoisting the white flag of surrender. Everything under Motorola’s aegis is being positioned for sale.

Its Home & Networks Mobility group, for example, is being carved into three separate businesses: Broadband Home Solutions, which will consist of cable and video equipment, including set-top boxes and modems; Broadband Access Solutions, next-generation broadband equipment; and Cellular Networks, wireless network equipment.

Motorola can spin this tale any way it wants — and, don’t worry, it’s doing just that — but what it all amounts to is capitulation. Don’t think savvy market watchers and shrewd investors are being deceived by the misdirection and obfuscation.

Said Ed Snyder, principal at Charter Equity Research:

“The Street sympathizes with [Motorola Chief Executive] Greg Brown, but they’re not going to give him any money.”

Wise move. Make him, and the Motorola board, earn it.

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