Motorola Tries to Regain Its Edge
Interview
November 08, 1999
by Chuck Lenatti
CEO Chris Galvin hopes to reinvent his family?s company for success in the Internet era.
Meticulously casual in slacks, loafers and a monogrammed shirt, Chris Galvin abruptly brushes his leg, annoyed that a ball of lint has invaded his sanctuary overlooking Motorola?s tidy Schaumburg, Ill., campus. Motorola?s (MOT) CEO is someone who prefers order to chaos, so what happens when things get messy? In 1998, that was a question many analysts were asking.
Motorola is a family business founded by Chris? grandfather, Paul, in 1928. Originally called Galvin Manufacturing, the company produced "battery eliminators," devices that ran battery-powered radios on household current. After battery-powered radios became obsolete, Paul introduced radios for automobiles and coined the company?s current name, though it didn?t officially become Motorola until 1947. Chris? father, Robert, led the company?s foray into semiconductors, pagers and cell phones.
But the company was in for a shocking lesson on how quickly fortunes can change in high-tech. Success had fostered complacency, and Motorola was blindsided when a little Scandinavian company called Nokia introduced the first digital cell phone in 1994. By the end of 1998, Nokia, not Motorola, was the world?s leading cell phone manufacturer. Smaller competitors that were more nimble and better focused were running rings around the bloated, horizontal Motorola dreadnought.
Chris Galvin was named CEO in late 1996, just in time for the roof to cave in. The semiconductor market was in a slump and Asia, where Motorola was heavily exposed, suffered a severe financial crisis. By the middle of 1998, the company?s annual revenue was flat, earnings were way down and the company?s stock was trading at about $40 a share.
But Galvin didn?t flinch. After reporting a rare second-quarter loss in June 1998, Motorola announced it would lay off 15,000 workers, 10 percent of its workforce. Next, Galvin focused the company on two key competencies, semiconductors and communications products, and jettisoned business efforts that were not focused on either area. Earlier this year, for example, Motorola arranged a leveraged buyout of its semiconductor components group with Texas Pacific Group.
Not all of Galvin?s changes had to do with cutting costs, though. In September, the company purchased cable settop box maker General Instruments?which was eating into Motorola?s cable modem market share?for $11 billion, showing that Galvin is willing to pull the trigger to acquire strategic companies. He also put his stamp on management. In April 1998, for example, he appointed a new CTO, Dennis Roberson, to help unite what had been warring tribes in R&D.
Motorola isn?t out of the woods yet, though. One of its key technology bids, satellite communications, is a mess. Iridium, the satellite system Motorola spun out to an international consortium, filed for bankruptcy in August. One analyst said that getting the members of the consortium to act together was like "herding cats."
Yet Motorola is clearly on the right track. For the second quarter ended July 3, the company reported a profit of $206 million, compared with a loss of $1.3 billion the year before. Wall Street is taking notice, too: Stock was trading at $87 a share on Sept. 30.
Just as important, Galvin is determined to transform stodgy Motorola into a cool company. Its pager-size StarTac phone became an immediate hit among fashion-conscious cell phone users. And the company built upon the device by integrating it with a Starfish Software personal digital assistant to create the StarTac Clip-On organizer. Motorola is also working on "third-generation" cell phones that can send video.
Motorola founder Paul Galvin built the company around the notion of integrating cars and radio. Grandson Chris envisions the convergence of Internet and wireless communications?and he is bringing those technologies to cars.
Galvin might like things tidy, but he?s proved he can roll up his sleeves and get down and dirty if he has to.
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