Motorola Inc. and Glenayre Technologies Inc. signed a memorandum of understanding that, if fulfilled, will license Glenayre to manufacture all Motorola’s paging infrastructure-effectively heralding Motorola’s exit from the paging infrastructure manufacturing business.
“We need to focus on the things we do best,” said Amanda Dahlke, spokeswoman for Motorola’s Paging Systems Group. She said Motorola intends to shift attention away from paging infrastructure-which she noted was a small portion of Motorola’s overall business-in favor of increased attention to paging subscriber devices, protocol enhancements and applications development.
“These are the areas in which we felt our best interests and the paging industry’s best interests would be better served,” she said. “We are not exiting the paging infrastructure business completely … We are winding down our development and refocusing our resources.”
Dahlke said the extent of that wind-down depends on how license agreement negotiations go with Glenayre and how much of the infrastructure business Glenayre is willing to take on.
For its part, Glenayre indicated it is more than willing to accept the entire infrastructure business, saying Motorola’s wind-down will be complete.
“Motorola is getting out of the infrastructure business,” stated Mark Smalley, Glenayre vice president of investor relations. He said Motorola likely will close down its factories and license Glenayre to make all FLEX-family infrastructure products.
“There will be one producer of infrastructure-Glenayre,” Smalley said. “If you want to buy from Motorola, then Motorola will ship you transmitters that Glenayre built. Going forward, I don’t believe Motorola would build any more products. All in all, Motorola is getting out of the production business.”
Motorola’s Dahlke said the Paging Systems Group will merge into Motorola’s Network Solutions Sector, which includes its cellular infrastructure interests. She said a small team will continue to focus on what paging infrastructure interests remain.
Motorola was required to make public the MOU before it could enter definitive negotiations with Glenayre, according to U.S. Security and Exchange Commission rules, Dahlke said.
The immediate question concerning Motorola’s exit from paging infrastructure is “Why?”
Dahlke said the move comes as part of the companywide re-evaluation of assets and restructuring that began some 18 months ago. Paging infrastructure has been a small part of Motorola’s operations relative to the company’s overall interests. Glenayre has commanded about 80 percent of the domestic-market share for paging infrastructure, while Motorola is more dominant internationally.
However, Motorola also makes cellular infrastructure. With rivals like L.M. L.M. Ericsson, Nortel Networks and Lucent Technologies Inc., the cellular infrastructure industry is much more competitive than the paging market.
Analysts speculate Motorola wanted to dedicate more energy and resources on this fight than the relatively less-dynamic paging infrastructure market.
Dahlke characterized that view as accurate, but did not elaborate.
Another possible catalyst for the move is the ongoing battle between the wireless messaging industry and the wireless voice industry.
“I think what Motorola and Glenayre are doing is more of a circling of the wagons move,” said Brian Cotton, industry manager for wireless communications at Frost & Sullivan. “They’re saying ‘Let’s try to work together here and make things a little smoother’ kind of thing.” He added the two had not been the friendliest of competitors. “There’s been some tension there. This is more of a making-up maneuver.”
Both Motorola and Glenayre said they could complete the licensing agreement in as little as 60 days. At that time, Glenayre will effectively monopolize the market. However, paging carriers do not seem concerned. In fact, most seem to endorse the action.
“I would say that Glenayre built a reputation and market share based on the quality of our products and the quality of its services,” Smalley said.
“Glenayre is not going to go out and exploit infrastructure customers when these same customers will decide what pagers to buy.”
Glenayre owns the Wireless Access Group, which is Motorola’s primary competitor for paging devices. The agreement will have no effect on the company’s device manufacturing business, Smalley said.
Smalley added that one infrastructure manufacturer actually would speed the deployment of two-way paging worldwide because it removes the competitive-bidding round normally undertaken during infrastructure deals. Toward that end, part of the agreement between Motorola and Glenayre includes the two contributing to a $5 million joint-development fund dedicated to marketing and developing two-way paging products and services. The fund likely would go to sponsoring various developer conferences, advertising, market research, studies and symposiums, much like the Asian ReFLEX conference the two sponsored earlier in the year. The effort even could take the form of a joint-venture company, but details have yet to be decided.
“I think this is a win for everybody,” Smalley said. “Motorola gets to focus on devices as it is becoming more of a consumer-oriented company, Glenayre gets to pick up infrastructure and the customer gets the best of both worlds, including faster deployment.”
In a separate agreement, Glenayre sold its radio-frequency design and manufacturing assets located in Quincy, Ill., to Selectron Corp. Under the deal, Selectron will own the factory, equipment and employees, but products made there still will belong to Glenayre.
