Samsung Pressure Gives Motorola Insomnia
Sun January 19, 2003 09:58 AM ET
By Yukari Iwatani
CHICAGO (Reuters) - If executives at the world's second-largest mobile phone maker, Motorola Inc. MOT.N , are having trouble sleeping, it could be because they are getting a wake-up call from Samsung Electronics Co. Ltd. 05930.KS .
The South Korean cell phone maker is known for the aggressive ways in which it gains and keeps contracts.
Last year it flew 400 engineers halfway around the world from Korea to Kansas, where they worked round-the-clock with colleagues back home to produce a new phone for U.S. wireless telephone operator Sprint PCS Group PCS.N .
That kind of determination has helped Samsung double its market share in two years, overtaking both Germany's Siemens AG SIEGn.DE and Sony Ericsson ERICb.ST 6758.T . The Korean handset maker vaulted into the world's No. 3 position in 2002 from No. 6 in 2000, and is now knocking on the doors of market leaders Nokia NOK1V.HE and Motorola.
Wireless industry analysts expect Samsung to boost its global share to 15 percent by 2004 from 10.6 percent at the end of last year's third quarter. At that rate it could overtake Motorola, which according to Gartner Dataquest had 14.4 percent market share at the end of the same period.
"It's got to be very unsettling because Motorola doesn't want history to repeat itself," said independent telecommunications analyst Jeff Kagan, referring to Motorola's loss of the No. 1 spot to Nokia about four years ago.
Considered an irrelevant player in the 1980s, Samsung jump-started its mobile phone unit in 1997 when South Korea adopted Code Division Multiple Access (CDMA) technology.
The company rapidly gained share in its home country as well as in the United States, helped largely by a combination of innovative designs, cutting-edge technology and aggressive marketing.
Among its successes, Samsung was first to launch phones with voice-activated dialing, offer Web browsing capabilities and incorporate global positioning system technology to allow emergency workers to pinpoint a caller's location.
Analysts recently gave Motorola's first batch of 2003 phones a lukewarm reception, criticizing the company's tardiness in introducing such features as color screens and integrated cameras.
"Motorola responds to what they see others doing; Samsung is proactive," noted Jane Zweig, chief executive of Washington-based wireless consulting firm Shosteck Group.
AGGRESSIVE SAMSUNG
And Samsung is only getting more aggressive.
Peter Skarzynski, senior vice president of wireless terminals for Samsung, said the company rolled out a new phone every three weeks in the United States last year. It plans to launch phones even more frequently in 2003.
Daewoo Securities analyst Chung Chang-won agreed, predicting Samsung's overall handset shipments will increase 36 percent in 2003 from a year ago.
In addition to its biggest markets in South Korea and the United States, Samsung is now targeting Europe, which uses cell phones based on a different technology standard than CDMA.
To contend with such a threat, analysts said they would like to see Motorola stop playing catch-up and introduce new designs and technology more consistently and quickly.
"It's no longer a world of just the incumbents," Zweig said, adding that Korea's LG Electronics Ltd. 66570.KS , Japan's Sanyo Electric Co. Ltd. 6764.T and Chinese manufacturers also are breathing down Motorola's neck.
"Motorola ... still makes decent product, but they're not the only ones that do," she said.
"WE'RE NOT PARALYZED"
To be sure, Motorola has already started making some of the changes it needs to stay ahead of its competition.
"With no disrespect to Samsung or anybody else, we're not paralyzed," Motorola President Mike Zafirovski told Reuters recently at a company event in Shanghai. "Our strategies are offensive in nature as opposed to defensive."
Under Zafirovski, who previously led the mobile phone unit, the company that invented the cell phone has been tightening relationships with customers in the last few years after its perceived arrogance cost it the top spot in the global market.
It hired executives from design and marketing powerhouses Apple Computer Inc. AAPL.O and Nike Inc. NKE.N , and has made splashes with sleek, tiny phones, sporting eye-catching designs like rotating covers.
"I don't know that they can claim the cutting edge, but they can certainly say they're a much better phone company," said Deutsche Bank analyst Brian Modoff. But even he has a "sell" rating on Motorola, citing the stock's expensive price, continued use of one-time charges, and the need to improve its business further. |
