Stardate 20011225.0100

(On Screen): Motorola has been in big trouble for a long time now, for a number of reasons. But one reason is that generally they just haven't been performing the way that their competitors have. So sales have plateaued or even fallen, and market share has slumped.

Redman praised Motorola for some of its efforts to date. "Their first goal needed to be to consolidate their offerings, and they've done that by, for instance, trimming their Reflex two-way-paging technology program," he said. "The next thing they need to do is recapture lead market share in one of their core areas, to renew confidence."

And that's not going to be easy. Motorola competes in a lot of businesses, but not too many of those would be considered "core", and while it may be able to credibly compete in many of those, I don't see much chance of it regaining market leadership in any of them. First, there's cell phones, and Motorola doesn't have a snowball's chance in hell of catching up to Nokia any time soon. It just isn't going to happen. And that won't be helped by the fact that Motorola's own iDEN system is on its last legs; it's not really competitive now and there's no 3G upgrade path. Motorola is also heavily invested in IS-136, another sunset technology.

As to cellular infrastructure, Moto had a bad name for quality there for a while; it's not obvious how easy it will be for them to rebuild that. The high-point (low-point) came when one major service provider actually gave up on a city's worth of Moto IS-95 cellular equipment after months of not being able to make it work reliably, shipped it all back to them for refund and cancelled all future orders, and then rebuilt their entire system from scratch with Lucent equipment. That was a major black-eye for Motorola.

Moto's microprocessor business is just as grim; there's no way that the PPC is going to dislodge Intel, or even AMD, on the desktop, nor will it dislodge ARM in high-end embedded. They've also ceded the low-end embedded market and are now an ARM licensee there; their own designs such as Dragonball are largely dead there. And Motorola doesn't even compete in mainframe processors (against, for example, Itanium or Sledgehammer or Power4 or SPARC or the now moribund Alpha). The rest of the semiconductor business also offers no hope for market dominance. There is no glamour in being a foundry and there are just too many players; it's not a market any one company really can dominate. And if it could, it would be TSMC (who counts NVidia among its clients) or IBM or Intel anyway. Motorola's processes do not have an industry reputation for being leading edge. Nor is there going to be any big-name value in the design of ASICs. By their nature those are invisible products.

Anyway, considering that Semiconductors overall has been the company's worst money-sink, and that sales are down by half from a year ago, and that the Semiconductor division has sustained the worst layoffs in the company and that Moto has seriously considered getting out of that business completely, it's unlikely to be the business they concentrate on to turn the corporation around.

Routers and networking? Not a chance in hell. Cable modems? I think maybe they do dominate that, but it's not a big enough market. Satellites? After the Iridium debacle, that's not exactly the business Motorola is going to want to use to rebuild its prestige.

Pagers? Maybe, just maybe. It's the only big-name business that they even have a chance of regaining market leadership. I'm just worried that it won't be enough.

I don't think that Motorola is beyond saving, though I think that they're going to have to start seriously shedding entire business segments, and that means that I think that the company is going to get really dramatically smaller than it is even now before it starts growing again. A year ago it had 150,000 employees; right now it's at 100,000 and it may need to continue to shrink to as little as 50,000 before it regains health. But those new cuts won't be layoffs as much as spin-offs and divestitures and, in the worst cases, outright liquidations of entire business groups.

But rather than trying for the symbolic value of market leadership somewhere, they need to concentrate on gaining actual capability leadership in some regard. They need to find something that they really do well, and then capitalize on that, to compete from strength rather than from desperation. If that happens, sales will follow as will market share. But to concentrate on market share without a competitive edge will require sacrificing profitability for the sake of sales, and in the long term that's death.

Motorola won't be saved by trophies; it needs to stop making blunders and start to perform well.