Motorola imitates Dell in struggling to regain glory

Motorola's H5 Miniblue headset

Motorola's H5 jewel case for charging and storage

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After four straight days of Apple stories, I have vowed to write about another company today. Today, it's Motorola's turn.

Today's New York Times noted Motorola's sudden decline from cellphone champ to marketing chump in the US market, citing disappointing revenues for the next two quarters. It's big problem: Motorola's hit RAZR phone is looking more and more like a one-hit wonder.

Edward J. Zander, the chairman and chief executive of Motorola, generally has little in common with Hollywood’s studio chiefs. But like them, his future may depend, at least in the short term, on whether he can produce another hit.

Mr. Zander arrived at Motorola early in 2004, a few months before the introduction of the unusually slim Razr V3, which went on to become the cellphone industry’s equivalent of “Star Wars.”

But an announcement on Wednesday confirmed what steady and substantial price drops for the Razr and follow-up models had suggested. Motorola unexpectedly cut its quarterly revenue forecast for the second time in two quarters, this time by $1 billion, and warned that the next reporting period would bring more bad news.
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Mr. Zander now faces two somewhat contradictory tasks. In the short term, Motorola’s best hope for a quick turnaround is coming up with a successful sequel to the Razr. In the long run, however, several analysts suggest that Motorola needs to turn away from the hit-driven business model.

Looking over Mr. Zander’s shoulder through all of this will be the activist investor Carl C. Icahn, who holds more than 2 percent of Motorola’s stock and has been pressing the company for change.

Motorola's situation resembles Dell's crash all over again. Both companies were successful based on one specific differentiating factor. In Motorola's case, it was the RAZR product. In Dell's case, it was direct to consumer sales, build-to-order. But both companies relied on their cash cows too long and didn't come up with second acts. In Dell's case, Kevin Rollins, the CEO, had to take the fall. At Motorola, Zander hasn't been ousted by the board yet, but I would argue that's simply a matter of time unless something changes dramatically.

Sadly, Motorola has had hit products in its pipeline that have inexplicably disappeared. I wrote in early 2006 about Motorola's killer Bluetooth headset, the tiny in-ear H5 MiniBlue. It was announced and demo'ed to much fanfare at the 2006 Consumer Electronics Show in Las Vegas. But as of March 2007, we still can't buy one and there's been no explanation from Motorola. That says more about its business than any amount of analysis.

So what can Ed Zander do to keep his job? Well, for starters, he needs to buy some time for the new products Motorola has in its pipeline can get to the market. That means doing some symbolic gestures, like launching a stock buyback program (which he has already done) and cutting his salary and bonus until Motorola is back on track (he hasn't done that yet). But more importantly, he has to market Motorola and its brand, which hasn't been done in any serious way in almost three years. And he needs to start doing it now. If he has any cool products in the pipeline, now is the time to seed them with Walt Mossberg and other influencers in the marketplace to generate some excitement around the company. If he doesn't have any exciting new products in the pipeline, then he should start looking for a new job. It's really that simple.

Full disclosure: The author has no positions in Motorola, but is long Apple Computer, which will become a competitor of Motorola in June with its iPhone launch.

Technorati Tags: Dell, Marketing, Motorola, Ed Zander