Motorola News
Motorola plans strategic shift in handset operations
By Nikki Tait in Chicago
Published: July 22 2001 19:33GMT | Last Updated: July 22 2001 20:43GMT
In a strategic shift with big implications for the global cellular phone industry, Motorola will on Monday announce plans to start marketing its proprietary handset technologies to other cellular phone makers.
The strategy, which will target rival brand-name companies and the contract manufacturers who work for them, will apply to Motorola's second-and-a-half-generation and third-generation platforms, which will be used in next-generation cellular phones.
Motorola expects to announce deals with contract manufacturers and brand-name companies in the next few months. Contract manufacturers are playing an increasingly significant role in the industry as cellular phone makers including Ericsson, Phillips and Alcatel parcel out production to cut costs.
Motorola's move represents a big shift in the way the group structures its cellular phone operations. Traditionally, the US telecommunications equipment and semiconductor company has used its technologies almost exclusively in Motorola-branded handsets. As a result, sales from Motorola's semiconductor division to the in-house handset operations are worth about $1bn-$1.5bn a year.
However, Motorola says that the changing dynamics of the cellular phone industry have led it to rethink this approach. "Several companies have announced changes in the way they will participate in the cellular handset business," Fred Shlapak, president of Motorola's semiconductor products division, said. "We see this as the beginning of a major discontinuity that parallels the personal computer industry in the early 1990s, with the rise of the motherboard industry and major brand assemblers - where value is derived by competing on the basis of brand, distribution and style."
Motorola says that in the future handsets, like PCs, will be marketed on the strength of their designs, pricing and distribution rather than technological differences. So the embedded software and silicon technology - which it believed could give its own handset business an edge over competitors - will be less of a distinguishing competitive feature.
Today's announcement may raise new questions among analysts about the group's commitment to its own branded handsets. Motorola's share of the competitive handset market has dropped to about 15 per cent, although it has brought in new leadership and seen modest gains on the back of a new product line-up.
Analysts may also question whether the move smacks of a revenue chase as growth in the cellular market slows.
Motorola, however, counters that its timing has been driven more by the looming market for 2.5G and 3G phones, which would allow high-speed data access and, eventually, the transmission of moving pictures to cellular phones.
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