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Content Tagged with motorola + razr
NoMo Moto? Is Motorola’s Cell-Phone Business Worth Buying?
Motorola said today it’s exploring strategic options that include selling its handset business. The news comes on the heels of the company announcing a terrible fourth quarter, thanks to continued weakness in the handset business.
Any buyer should look carefully at Motorola’s handset business. By putting it up for sale, Motorola is admitting that the handset division is operationally weak, and to some extent, beyond redemption.
The overreliance on RAZR, and later its inability to get out of the rut of producing phones that never became “hits,” proves that the bureaucratic poundage was weighing the company down. Even if it was operationally sound, the company would need some vision to get back on track and fight it out with the likes of Nokia, Samsung, LG and newcomers likes Apple.
It is a hard fall for a once-proud company, which along with Nokia and Ericsson made up the triumvirate that controlled the wireless business with an iron fist. In order to understand how badly Motorola has stumbled, compare its daily sales of roughly 454,000 with Nokia’s daily sales of 1.3 million.
Recently, companies like Alcatel and Siemens have sold off their handset businesses to Asian handset makers. Those deals didn’t work out too well for the buyers, though. Buyers beware.
As the Moto turns
As a kid my after-school sitter was the outlandish and catty plotlines of daytime soaps — Days of Our Lives, As the World Turns, and the like (latchkey kids unite). Now after reading the latest on Motorola’s fall from grace and recent anti-Zander comments from Carl Icahn, the plotline of the handset maker’s struggles is straight off a catfight-filled soap opera copy desk. Maybe Moto CEO Ed Zander will be replaced next season by a long-lost twin who’s actually a cyborg.
In a full page page ad in the Wall Street Journal Carl Icahn calls Motorola “troubled” and says it has “stumbled badly” — all part of Icahn’s plan to capture a Moto board seat. In the letter Icahn also attacks a reported comment from Ed Zander that he loves his job, but hates his carrier customers, and calls Zander’s comment “something straight out of Alice in Wonderland.”
Activist investor Icahn is no stranger to controversy, but increasingly Zander is being painted more like the Mad Hatter. To a large extent by mad investors, that is. The Wall Street Journal posted a long piece about Zander’s role in Moto’s decline this weekend. The gist is that under Zander’s lead Motorola’s relied on the success of the RAZR for far too long and left itself hanging with no followup act. Nothing that is suprising to our readers.
The article chronicles the Motorola employees that left as Zander led the ship astray, like Ron Garriques and Mike Zafirovski. now CEO of Nortel. The talk in Silicon Valley is that Zander received a lot of unwarranted praise for his role in promoting the RAZR, and his lack of product vision is only now being demonstrated after the shine of the RAZR has worn off.
Moto still tripping over phones
Motorola CEO Ed Zander has been calling the company’s handset results “unacceptable,” with a pledge to improve performance. But it looks like it’s going to take several quarters to try to fix the problem. The company posted first quarter sales of $9.43 billion - close to its previous forecast — but lower than the first quarter of 2006, and a net loss of $181 million.
Moto’s wings got clipped by the handset business. Motorola’s mobile devices division brought in $5.4 billion in sales, down 15 percent compared with the year-ago quarter, and an operating loss of $231 million, compared with operating earnings of $701 million in the year-ago quarter. Blame it on the profitless prosperity of cheap phones, and over reliance on the RAZR.
Mark Sue from RBC says:
It’s got to stop getting worse before it gets better and we’re looking for another bumpy ride in 2Q as channel inventories clear and Motorola adjusts its mobile devices business model.
Motorola says it expects a “gradual recovery” in the mobile devices division starting in the second half and expects to be profitable for the full year.
Not that we are surprised at the results - Motorola does okay for a couple of quarters, press applauds and then the sky falls. Its like an iPod set on repeat-playback mode.
Seeking Alpha points out: “the company managed to end the quarter with higher inventory than when it began. That, in turn, sounds like a recipe for further discounting and more trouble for the entire wireless sector.” True dat.
RAZR cuts are deep for Moto
Motorola needs to get someone to write a book about them, outlining their successes and their mistakes. And devote an entire chapter on why they shouldn’t rely on a single product too much. Remember the Startec? Well that phone sold like mad, and then suddenly it didn’t and Motorola stock swooned.
History is repeating itself with RAZR, which has been milked to death, and the sales have just nose-dived, which is why the company is reporting losses and is bracing for dismal times ahead.
Motorola is now lowering its sales from previously announced (January 2007) estimates of between $10.4 billion and $10.6 billion to the $9.2 billion to $9.3 billion range in the first quarter of 2007. Losses, oh yeah, they got those too. They say, they are shifting focus to beefing up margins, which despite everything that has transpired makes me believe that they will be a bidder for Palm.
“This is a fast business, very fast,” said Ed Zander, Motorola’s chief executive officer, told the Wall Street Journal. “And we just didn’t react fast enough.”
“Motorola is trying to move away from the price game for market share, but the product portfolio at the moment is lacking in the high-end and the low-end,” writes RBC Capital Markets analyst, Mark Sue. You can say that again Mark!