Interesting article on Motorola in todays WSJ. MOT and NXTL both up in premarket. Restructuring will have a direct positive impact on IMO.
Motorola Plans Restructuring,
Forming Two Major Divisions
Electronics Giant Will Create Units
For Consumer, Industrial Customers
By QUENTIN HARDY
Staff Reporter of THE WALL STREET JOURNAL
Motorola Inc. is planning a major corporate restructuring that will merge about a half-dozen businesses into two huge divisions, one geared to consumers and the other to industrial customers, people familiar with the company say.
The operations that build infrastructure products for paging, two-way radio and cellular telephones will be combined into one division. Motorola will also create a separate division for sales of consumer devices such as cellular-telephone handsets and pagers, said the people. The Schaumburg, Ill., company's big semiconductor operation, which was revamped last year, will remain separate, as w
Currently, Motorola operates its paging, cellular and two-way radio operations as separate company "segments," each of which has its own infrastructure and consumer sectors. Each segment also has its own technology-development and sales forces. Last year's sales by the three segments totaled $20.6 billion, out of $29.8 billion in revenue at Motorola. The reorganization is likely to directly affect thousands of Motorola employees.
'No Secret' at the Company
Motorola officials wouldn't confirm details of the planned changes, which are expected to be announced within the next several weeks. "We've made no secret inside the company that we are looking at our structure," said Albert Brashear, Motorola's director of corporate communications. He added, "No one at Motorola would be surprised if [the restructuring] looked like that ... but more discussion has to take place." The reworking of the three segments into consumer and industry-oriented divisions reflects both technological and competitive changes that have jarred Motorola in recent years. In addition, they reflect efforts by Christopher Galvin, who became chief executive officer of Motorola in 1997, to make his organization less internally combative and more cooperative.
At a meeting of some 500 Motorola corporate officers last year, where changes such as the restructuring were first discussed, Mr. Galvin told his troops that the time had come to end Motorola's "warring tribes" culture, where different sectors would attack each other's products and procedures. The culture was credited with giving Motorola well-engineered technologies, but also led to internal feuding and suspicion.
"Chris told us to get comfortable with change or move on," according to one person who attended the meeting.
Driving the Changes
The chief force for changes at Motorola, however, may be technology itself. Wireless businesses such as police radios, cellular phones and pagers for bike messengers once seemed distinct. Now they overlap. For example, Motorola's land mobile-radio segment, which produces two-way radios, makes a dispatch-style device for Nextel Communications Inc. that can also handle cellular-phone calls and accept alphanumeric and text messages similar to pagers.
The Nextel integrated offering was Motorola's greatest success last year, in terms of growth. Land-mobile sales were up 23%, to $4.9 billion, while overall company sales grew by just 7%. Cellular-product sales grew by 10%, to $11.9 billion last year, while messaging segment sales fell 4%, to $3.8 billion.
But Motorola hasn't changed as rapidly as the technology, and the different sectors have often repeated painful lessons. The digital technology behind the Nextel equipment, for example, required a massive overhaul of software operations at land-mobile, similar to overhauls later required in the development of digital cellular infrastructure and handsets.
Leaders of the Divisions
Merle Gilmore, who led the land-mobile segment while it developed the Nextel product and who now heads up Motorola's operations in Europe, is expected to take over one of the two new reconfigured divisions. The other candidate hasn't yet been determined, although likely candidates include Jim Norling, president and general manager of Motorola's messaging, information and media segment; Fred Kuznik, president of its cellular subscriber sector, and Jack Scanlon, general manager of the cellular and space business.
The explosion of wireless devices like cellular telephones has put Motorola more firmly into consumer markets, after years of sales to business users. Its share of cellular-handset sales has fallen in recent years, bested by more snazzy offerings by competitors such as Finland's Oy Nokia, and Telefon L.M. Ericsson of Sweden. Several other savvy consumer-product companies, such as Sony Corp. of Japan and Philips Electronics NV of the Netherlands, are also making renewed runs at the U.S. market.
Motorola's overall share of the U.S. cellular-handset market stood at 34.1% last year, according to consulting firm Herschel Shosteck Associates Ltd., compared with 55% in 1995. Nokia's share meanwhile, increased to 24.4%, from 13.6%, while Ericsson had a 14.4% share in 1997, up from 2.4% in 1995. Motorola officials dispute those figures, but won't provide their own market-share numbers. |
