Friday, November 30, 2007

MOT’s Down, Ed’s Out

It should come as no surprise to anyone that the axe finally fell today on Motorola’s beleaguered CEO Ed Zander. Motorola surged to massive profitability based on the wildly successful Razr, becoming the #2 cell phone maker behind Nokia. Since then Motorola has steadily been losing both market share and money. Sales fell 36% in Q307, resulting in an operating loss of $138 million. That was actually an improvement over the previous quarter, but with Samsung—the new #2—now eating Motorola’s lunch and with Carl Icahn—this decade’s answer to Chainsaw Al Dunlap— gunning for Zander’s scalp, it was time for Ed to “spend more time with [his] family.”

The problem, as Paul Sagawa, an analyst at Sanford C. Bernstein, points out, is that “the cavalry has been slow in coming in with new products.” Since the Razr all Motorola has been able to come up with is 26 different flavors of the same formula, which has gotten stale. When the Razr was introduced a couple of years ago, it was the epitome of cool; now it’s ‘so last week’. Meanwhile, Samsung has mastered the ‘art of cool’, which is mostly what matters among younger users, who buy most cell phones. The iPhone has removed any question that styling trumps technology any day, as long as you have cool features. The iPhone is hardly innovative, with the major exception of its physical design and user interface. Motorola has traditionally had great engineers but—except for what will hopefully not prove to be one brief moment in time—crappy designers.

I had a Motorola StarTAC over 10 years ago and marveled at its small size but dog ugly appearance. You needed either two hands or a long thumbnail to flip it open. It sold well until Nokia came out with an ultra-slim, chrome-cased beauty that caused a mad rush to the phone stores. Motorola just continued to ride that same pony into the ground.

In stepping down, Zander passed the baton to Greg Brown, Motorola’s COO, whom Zander has long groomed as a successor. That’s another classic Motorola problem, perpetuating a culture that clearly needs to change. Motorola has successfully reinvented itself several times in its history, almost always belatedly, and thus more painfully than needs be. Having jumped into a market that moves much faster than it does, Motorola needs to poach top leadership talent from Nokia, Samsung, Sony/Ericsson or Apple. Bring in fresh new ideas and shake things up. In Bob Dylan’s words, “He not busy being born is busy dying.”


Greeley's Ghost said...

Fantastically appropriate closing quote, John! Motorola seems to have no bogeyman, and that's the problem. Samsung's goal is to out-Sony Sony, and they're rolling very nicely toward that goal.
Zander may be fortunate that he had a hit or two at Motorola under his wing, because changing that culture is impossible (it's not a Motorola thing either). Although you could point to IBM and say, hey, Big Blue can change....

John Donovan said...

It's Alright, Ma (I'm Only Bleeding)