Since Ed Zander took over as chief executive of Motorola (MOT) two and a half years ago, there have been a lot of changes, many of them for the better (see BW, 2/27/06, "Why Zander Jumped to Motorola").
The company's Razr cell phone (see BW Online, 4/14/06, "Mobile Phone Bonanza") has been a hit with customers, helping Motorola grab share in the wireless handset market. And on May 22, Motorola launched its highly anticipated Q phone, a multimedia device that has a keyboard, a Windows software platform for e-mail and other applications, high-speed Internet access, and a bright screen for watching video (see BW Online, 4/07/06, "Verizon Wireless Doesn't Have to Brag"). Some have pointed to the Q as a likely rival to Research In Motion's (RIMM) popular BlackBerry wireless e-mail server.
But the reaction from investors in recent weeks has been mixed. Motorola's share price closed on May 22 at 20.74, down from a 52-week high of $24.99. Concern that Motorola would make a big acquisition to cope with pressures of the highly competitive wireless market drove down the stock 2.6% to $20.93 on May 17.
Such rumors are common, but they've been especially prevalent in the telecom-equipment sector since Alcatel (ALA) announced a deal to acquire Lucent (LU). One scenario: Motorola would snap up Siemens' communications business (see BW Online, 4/05/06, "The Alcatel Effect").
On May 22, Zander met with a group of reporters in New York, including BusinessWeek Online senior writer Steve Rosenbush. Edited excerpts follow:
What sort of person will go out and buy a Q? The Razr certainly redefined (the market) for this generation of cell phones. With the Q, we weren't trying to design another smart phone. It's more than a smart phone. The Q is more complicated than many PCs of several years ago. We wanted to stick with the thin design, but the most important thing is that we wanted to take advantage of faster networks, multimedia capabilities, and rich content.
The Q took longer than expected to develop. Why? We began work in late 2004. We originally wanted to bring the phone to market in the first part of this year. We're bringing [it] to market toward the second half. It took more time to develop the software integration. That's the difficult part, developing the software so you can take an incoming call while you watch a movie.
How is the infrastructure business faring? Does it have enough scale to compete with combinations such as Lucent and Alcatel? Will Motorola be a consolidator? As opposed to what?
As opposed to a seller, or a company that focuses on organic growth. I have been in tech for 30 years. And if there's been a big tech merger that has worked, you'll have to tell me what it is. They are hard. They're not impossible, but they are hard.
So will M&A be an important part of Motorola's growth strategy? We have bought a number of small companies recently. We tend to buy smaller companies for these patents and their people. I like to look ahead.
What is Motorola doing differently now that you are CEO? We're more global. We have design teams in Milan, Beijing, centers of fashion and design. That has helped us design phones like the Ming, just for the China market. It probably never will be sold in the U.S. We're not focusing on designing cool phones. We're focused on creating cool experiences. It's mostly those two things. We're also building phones with common components, which speed up time to market. That wouldn't have happened a few years ago, when most designs were one-offs.
What will it take to get the stock price going? I'm not going to talk about the stock price or the quarter. But we're working on the supply chain, information technology, and cost structure, consolidating manufacturing centers to improve operating earnings. It's a delicate balancing act. You still have to grow the top line, over the long term. That's why we're China and in India. That's where a lot of the action is.
Rosenbush is a senior writer for BusinessWeek Online, based in New York
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