Motorola Gets Good

By buying Good Technology, the handset maker is seeking a foothold in the mobile messaging market dominated by rivals RIM and Palm

by Roger O. Crockett

For months Wall Street has wondered what Motorola would do with its growing cash stockpile—as it reported some $1.6 billion in cash flow in the third quarter. Well, on Nov. 10, Motorola (MOT) answered in a big way. The communications giant announced it's buying Good Technology, a provider of e-mail and other computing software for smartphones, in an all-cash deal. Financial terms of the deal were not disclosed.

The acquisition adds instant credibility to Motorola's effort to become a more significant player in the mobile messaging market. The segment is now dominated by Research In Motion (RIMM), with its BlackBerry products, and Palm (PALM), which makes the Treo device.

In contrast, Motorola has been something of a late entrant with its Q phone, a thin device modeled after its hit Razr phone. The Q has received mixed reviews. One complaint: it does not have a built-in, simple method of accessing and sending messages beyond its users' corporate firewalls.

Good Technology's software, called "Good Link," excels at just that. In fact, Good has become somewhat of a favorite at corporations, amassing about 12,000 as clients in the U.S. Motorola, meanwhile, has been trying to break into the corporate market. But that hasn't proved simple, in part because its mobile products haven't simplified a customer's ability to access corporate applications.

Despite offering a dandy mix of stylish phones, "Our customers have said, 'You don't have everything that you need,' " acknowledges Scott Durchslag, head of product and experience invention for Motorola's mobile devices unit. "The solution that they most often point to is they would like us to deploy Good."

Winner-Take-All Market

Motorola is following the lead of mobile phone leader Nokia (NOK) in trying to buy its way into the mobile messaging market. Last year, Nokia agreed to pay $430 million for Intellisync, another developer of software for wireless e-mail. The acquisition was completed this year, and Nokia has begun to introduce products that blend the two companies' technologies.

Mobile messaging is one of many fronts in the battle between the two giants. (see BusinessWeek.com, 7/20/06, "Does Motorola Have Nokia's Number?"). Both companies believe that businesses in the next five years will roll out e-mail devices to the rank and file, as such devices get smaller and cheaper. The trouble for them is that this is a winner-take-all market—and right now they're losing, particularly to RIM. Companies don't want to mix and match software and phones, because of the headaches involved. "Corporations don't want a variety of devices," says Tero Ojanpera, chief technology officer for Nokia.

Expect the smartphone battle to escalate dramatically in the months ahead. It's already the fastest-growing category of phone sales. RIM recently released its Pearl, which targets consumers as well as workers with its photo and music-playing functionality. Palm is fighting the slew of competition in the space with its new, colorful Treo 680 smartphones and the higher-end Palm 750p ready for debut with Cingular Wireless next week.

BusinessWeek has also learned that Cingular, a joint venture between AT&T (T) and BellSouth (BLS), will announce that it will soon sell Samsung's long-awaited, ultra-slim Blackjack (model SPH-i607), a sleek-looking device that handles e-mail.

Everywhere Access

These are all phones that can also be hooked up with Good's software. Motorola says it won't attempt to lock Good out of Palm and other best-selling systems. "Those relationships will continue," Durchslag says. Even so, the handset manufacturer likely will get first priority for new services and software.

The acquisition fits neatly into Motorola's plan to help both corporate customers and consumers move into the future of wireless communications. The vision is for users of wireless gear to access content wherever they are, a concept Motorola dubs "seamless mobility." That means they can play music, for example, in the house and easily transfer the same song to their phone as they head outdoors. And the same principle applies to tapping into content on workplace desktops from home or a car.

Viable Rival?

Good has a transport technology, a pipeline to the corporate desktop, that enables users to zap data through a corporate firewall. Together, Motorola and Good expect to not only enable customers to access e-mail but also video, music, and then Internet and various other types of content from beyond the workplace. Employees could use their phones to go online to browse the Web, blog spontaneously, or watch a quick music video. "That's the opportunity that gets us so fired up," says Danny Shader, Good's CEO.

Still, questions about the viability of the deal loom. Corporate buyers are careful about the mobile technology they select. With so many employees owning and seeking a variety of phone types, they might be reluctant to quickly place a bet on all Motorola phones, especially when BlackBerry devices and Treos are so popular, particularly with the top brass.

So it could be tough going for Motorola to make meaningful forays in the near term, even with Good by its side. "Good looks and feels like a good extension of their technology," says Paul Catalano, a wireless consultant for RelevantC Business Group in Chicago. "But if it doesn't make sense to the buyer, then that's a recipe for a failed acquisition."

Crockett is the deputy bureau chief for BusinessWeek in Chicago.

With Cliff Edwards in San Mateo, Calif.