Dell Inc. pushes into cell phone biz, led by Motorola veterans in Buffalo Grove, IL
______________________________________________________________
By John Pletz
Crain's Chicago Business
January 04, 2010
Dell Inc.'s recent foray into the cell phone business can be traced to a small skunkworks run out of a Buffalo Grove business park by Motorola Inc. veteran John Thode.
Dell, the Texas-based computer maker, began selling smartphones in China and Brazil at the end of 2009, and it's expected to introduce a phone in the U.S. this year. The company hopes to follow the path blazed by Apple Inc., a computer maker that now gets 18% of its revenue from phones and has become the third-largest seller of smartphones worldwide.
"It's obvious the battle has moved to very small (devices)," says Roger Kay, a computer-industry analyst at Massachusetts-based Endpoint Technologies Associates Inc. "You've got to be there, or you'll be left out."
That's why Michael Dell invited Mr. Thode to Austin, Texas, two years ago and quickly offered him the job as vice-president of small-screen devices, overseeing everything from netbooks — the stripped-down laptops that are the fastest-growing part of the PC business — to phones.
Mr. Thode leads a team of fewer than 50 people in Buffalo Grove who are the hub of Dell's smartphone business. Many, such as General Manager Bill Gorden, once worked for Motorola. There are 100 or so staffers in Silicon Valley, mostly working on software, along with people at various Dell sites around the world.
Dell may have started small with phones, but it's now betting big. It recently reorganized the company with Communications Solutions as one of four primary business units. That division will be run by Ron Garriques, who headed Motorola's cell phone business until 2007.
"There's no turning back," says Mr. Thode, who predicts his staff in Buffalo Grove could double or triple in the next year as the business grows. "We're here to stay."
Dell is the latest smartphone player that has sprung up in Chicago, feeding off the talent pool built up by Motorola over the past two decades but depleted by thousands of layoffs in the past three years as the Schaumburg-based electronics giant's phone sales plummeted 75%. Canada's Research in Motion Ltd., maker of the BlackBerry, has built up a research and development facility in Rolling Meadows with several hundred workers.
Motorola declines to comment on Dell's smartphone aspirations or how many of its employees have defected to other companies. While the exodus may hurt Motorola, it's good for Chicago, says Dan Lyne, director of technology development for World Business Chicago, a non-profit economic development group: "It creates an economy where there are more options for skilled talent."
Although he spent a quarter-century at Motorola, doing everything from two-way radios to cellular base stations before moving into the handset business, Mr. Thode is using a different playbook at Dell.
His staff maintains control over product design; it's using partnerships with Google for the basic software platform, as well as contract vendors to engineer and build the phones. That's how Dell was able to break into the smartphone business in about the same time it took Motorola to come up with its answer to the iPhone.
But for Mr. Thode, 52, a marathoner who grew up in northwest suburban Niles, the past two years have been a prolonged sprint in which he worked to teach a computer company how to navigate the phone business. Wireless phones are much more heavily regulated than PCs. "There was a learning curve," he acknowledges.
STRATEGY QUESTIONED
Dell's success is hardly assured. While Apple has done well in smartphones, rival computer maker Hewlett-Packard Co. has not, notes Jim Suva, a San Francisco-based analyst at Citigroup Inc.
Mr. Thode insists Dell will play to its strengths, wooing cell phone carriers by offering to develop co-branded phones and providing them the logistics services or online customer interaction capability for which Dell is known. He doesn't aim to duel Apple outright to be the coolest consumer product.
"We're not trying to be what we are not," he says. "We recognize the customer is the carrier. If we do great products for them, they'll also be great for the consumer."
Analysts such as Citigroup's Mr. Suva question the strategy. "I think you have to start with the consumer. There's no brand awareness with Dell cell phones. The iPhone is getting into (corporations) because of its success with consumers."
Dell has stumbled in efforts to branch into consumer products beyond PCs, quickly aborting lines of PDAs and MP3 players. Mr. Thode argues his team proved its consumer chops with the Mini 9 netbook, which won more awards than any Dell product. Dell hasn't yet launched a phone in the U.S., the world's biggest market for phones, where Motorola has successfully introduced its own Google-based phone with Verizon Wireless, and Apple and BlackBerry dominate the smartphone category.
But Mr. Thode is going head to head with Apple and Motorola overseas. China and Brazil are crucial to Motorola's hopes of rebuilding a phone business that's slipped from second place to fourth worldwide. Mike Zafirovski, former Motorola president, says he wouldn't bet against Mr. Thode, whom he relied on to launch a new line of phones.
"Every challenge I gave to John, he delivered. He's going to do whatever it takes."
©2010 by Crain Communications Inc. |
