Tragedy named Motorola

“My second day at Motorola in August 2008, I went through all of the company’s phones. I sat there for three hours and looked at everything, amazed. There is not a single smartphone.” This is the share of former Motorola CEO Sanjay Jha, an Indian engineer studying in the UK and former CEO of Qualcomm.

His experience shows an uncertain Motorola in the context that Apple has just launched the first iPhone model and Motorola has ceded the world’s number one mobile phone manufacturer to Nokia nearly a decade ago. What pushed America’s tech legend to this extreme? The answer is complex, but certainly not without its share of Motorola’s governance blunders.

“Poison” from internal competition

In 1956, Bob Galvin inherited Motorola from his father and founder Paul Galvin. He is considered one of the greatest American industrialists of the 20th century with his foresight and fierce competition. From 1959 to 1990, Motorola’s annual revenue increased from $290 million to nearly $11 billion, making it one of the 50 largest companies in the nation.

Bob Galvin strongly believes that only competition creates excellence. Because at that time, Motorola encountered little external competition, the CEO activated internal competition. For example, departments vie for rewards for being the most productive. In fact, it led to two booming semiconductor and communications businesses under CEO Bob Galvin and in the years since.

However, internal competition left the handset and network technology departments with no common ground. The two CEOs William Weisz (1986-88) and George Fisher (1988-93) did little to stop them. That makes even though Motorola was one of the first to develop digital mobile technology to replace analog, the mobile division felt there was no need to switch from analog to digital.

Mike DiNanno, a former supervisor of several Motorola divisions from 1984 to 2003, recalls that in the 1990s, working with thousands of Motorola network engineers, he found that all were using digital phones made by the glasses. rival Qualcomm made. “There wasn’t a single Motorola phone in the building, even as the other side of the company was engaged in a bloody, years-long battle with Qualcomm.”

It took a long time for the “toxic” work culture to show its effects, mainly because the mobile network division was still doing well. In 1994, 60% of cell phones sold in the US were from Motorola. The wireless division contributes nearly 65% ​​of the company’s revenue.

In 1997, Bob Galvin’s son Chris Galvin took over Motorola with a global legacy of 60 branches, most of which were weak. Most notably, the Iridium Internet connection project, which cost $2.6 billion and thousands of hours of work by Motorola engineers, failed and went bankrupt in 1999. The technology and telecommunications crisis began in 2005. 2000 caused Motorola’s stock price to drop, while SARS in 2002 disrupted international supply chains. In 2001 alone, revenue dropped by nearly $7 billion to $30 billion, a loss of nearly $4 billion.

To minimize the damage, the new CEO laid off 56,000 out of nearly 150,000 employees, closed the factory. He put all his hopes on the folding mobile phone RAZR, but was fired before the device was released due to poor business results. Three months later, the company gradually recovered as the RAZR became a “monster” with more than 50 million units sold in the first two years. By 2004, Motorola’s market value reached $42 billion. The most excited person is undoubtedly Ed Zander, the CEO replacing Chris Galvin.

The “foolish” move

While intoxicated with victory, one of Zander’s worst decisions as head of the business was to sign a deal with Apple by his close friend Steve Jobs. The two companies developed the Motorola Rokr E1, the first phone to connect to Apple’s iTunes music library. Zander believes that working with Apple will make Motorola interesting again. Reality is the opposite. Motorola has taught one of the most innovative, competitive, and customer-engaging companies how to make a phone.

Two years later, when Jobs introduced the iPhone, Motorola was still engrossed in the RAZR and released as many versions as possible. As a result, they reaped unprecedentedly low profit margins. One analyst estimates they only make $5 per device sold.

Besides, due to continuous layoffs for several years, Motorola’s creative machine also slowed down. Zander says he sees the smartphone era coming, but Motorola doesn’t have people knowledgeable about the software involved. He admitted to his mistake that he didn’t run the mobile division himself. Another mistake was that he left the China business to the regional director, which collapsed in 2007. That same year, Samsung overtook Motorola in phone sales for the first time.

In 2008, under shareholder pressure, Motorola spun off its mobile division, headed by co-CEOs Greg Brown and Sanjay Jha. To prevent needless loss of money, Jha decided to cut both the cost and the number of phones. At Motorola, 60 managers work on dozens of different models. In contrast, Apple put all its efforts into a single model. Jha found a way to save the business, which was to make a successful phone model for Verizon, a carrier struggling to compete with AT&T, the exclusive distributor of the iPhone.

A headache for Jha at that time was having to choose between Windows Phone and Google Android operating systems. Even when presenting his plan to use Android in early 2009, a top executive at Motorola declared this was crazy. Google Android is not ready for its heyday, and Microsoft is one of the most powerful software companies. However, with a 4-3 vote, his plan was approved.

Motorola Droid model was born in October 2009 with the participation of 200 Motorola engineers and a group of Google employees, led by “Android father” Andy Rubin. The first few months, Droid sales outnumbered iPhones. By the end of 2010, after four years of heavy losses, the mobile division was profitable again.

However, for those who have worked at Motorola for a long time, the success of the Droid is mixed with bitterness. The Motorola Droid isn’t the kind of world-changing invention like the Motorola DynaTAC, mankind’s first mobile phone. Moreover, the company inadvertently teaches other companies how to make a great Android device. Very quickly, old competitors, especially Samsung, dominated the market.

At the time Motorola split in 2011 into Motorola Mobility and Motorola Solutions, Google was working on a plan to acquire Motorola Mobility. Google successfully acquired the company in May 2012 for $12.5 billion. Jha quit his job shortly after and was replaced by someone new. However, all of Google’s expectations with Motorola failed, most evident in the cumulative loss of more than 1 billion USD in the first quarter of 2014. That’s why Google “sold quickly” Motorola Mobility to Lenovo for a cheap price, 2.91 billion USD. The deal was completed on October 30, 2014, opening a new chapter for the US “legend” under a Chinese company.