BUSINESSWEEK ONLINE : JANUARY 22, 2001 ISSUE
SCIENCE & TECHNOLOGY Motorola Can't Seem to Get out of Its Own Way On the frozen plains of Schaumburg, Ill., executives at Motorola Inc. (MOT) might happily trade their snow boots for Nokia's (NOK) shoes. Sure, Nokia's hiccup in handset sales sent its shares tumbling. But that pain pales next to Motorola's chronic performance woes. Since last March, the one-time high-tech bellwether has lost two-thirds of its value as its shares have collapsed to $20 from $60 a share. And on Jan. 10, Motorola reported fourth-quarter earnings of $335 million--down from last summer's expectations of $615 million--on sales of $10.1 billion. Motorola, says Jane A. Snorek, vice-president at Firmco, a Milwaukee investment house that owns shares in the company, ''is in a lot of trouble.'' What's bugging Motorola? Certainly the $37.6 billion company--which depends on semiconductor sales for about 20% of revenues--suffers from the cyclical swings of the chip industry. But its biggest problems stem from its $13.3 billion wireless business. In the past two years, Motorola's market share in cell-phone handsets has fallen to 13% from 17%, says researcher Dataquest Inc., while Nokia today controls a third of the market, up from 27% in 1999. Simply put, Motorola can't quickly and profitably produce the phones consumers want. The company missed the transition to digital in the mid- '90s and today grapples with a product line that's too complex and hard to manage. Compare Motorola's product line to Nokia's. The Finnish company uses just a handful of basic designs that share components such as screens, batteries, and some chips. Motorola, by contrast, juggles many different model platforms with little overlap among parts--making it nearly impossible to get the economies of scale Nokia enjoys. And Motorola phones haven't clicked with consumers. U.S. cellular operator Cingular Wireless, for example, says Nokia phones dominate. At Sprint PCS Group outlets (PCS), Samsung Co. (SSNHY) usually wins. The reason: customers say Motorola designs are clunky, and too many top $200--higher than most people will pay. The greatest challenge for CEO Christopher B. Galvin is to develop a production process matching Nokia's. To that end, Motorola is whittling its model platforms to fewer than a half-dozen, sharing many basic components such as keypads. By mid-year, Motorola should churn out handsets far more quickly--and at far lower prices, says Leif G. Soderberg, head of strategy for Motorola's phone unit. ''We're going to have fewer products and make the ones we've got killers,'' Soderberg says. Better hurry. Even if sleek new phones are ready as soon as promised, Motorola can't afford more lost ground. It ''could fall so far behind it'll never catch up,'' says Edward F. Snyder, analyst at J.P. Morgan H&Q. With so much at stake, Motorola execs must be shaking in their snow boots. By Roger O. Crockett in Chicago _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Is Nokia's Star Dimming? TABLE: Nokia's New Firmament CHART: Nokia Isn't the Biggest...But It's Growing Fast...And Profits Are Strong Motorola Can't Seem to Get out of Its Own Way CHART: Back to Square One INTERACT E-Mail to Business Week Online

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