Having cast his shadow over the company for more than half a decade, the resignation of Christopher Galvin as chief executive officer of Motorola Inc. has foisted on the company the challenge of which path to follow next.
The appointment of a replacement will not only require a new vision, but also a decision about which parts of the company will remain and which parts will be displayed for poaching companies to buy.
“The new leader of Motorola needs to take a hard look at corporate strategy and be willing to divest properties that do not maximize long-term corporate growth potential,” said David Kerr, vice president, Strategy Analytics global wireless practice. “The new leader must decide how Motorola will optimize its portfolio of business. Will it regain handset leadership, be a semiconductor powerhouse, a networking leader, or a volume contract electronics manufacturer?”
Will it be difficult to recognize the company in a few years, the way Lucent Technologies Inc. has after being broken into its current numerous parts? What would such a scenario do to Motorola’s image as a wireless titan?
Galvin leaves the No. 2 cell-phone maker with no prosperous division, with its infrastructure and semiconductor divisions limping and bleeding, and fueling endless speculation about which companies want to buy the various units.
Even the cell-phone business, riding higher in market share than other divisions, is valiantly pursued by companies such as Samsung Electronics and Siemens AG. Some analysts think Motorola’s glory days are ebbing as the division continues to work at odds with market trends with products that fail to anticipate demand. It has rolled out high-end phones when low-end devices will do, and vice versa.
Market optimism about the prospect of a new Motorola post-Galvin led to upswings of about 6 percent in the company’s stock to about $11.70 a share-still a sharp contrast to its $20 per-share stock when Galvin assumed the office. Those very gains were lost Friday with reports of its camera phone being delayed beyond the critical holiday sales season.
“Given the long history of criticism by investors towards Galvin, we believe this decision will be viewed as one of the most positive developments of any scenario a shareholder could imagine,” wrote Albert Lin of AmTech Research. “While we found many of Galvin’s actions to be effective and appropriate, we agree with the criticism that many turnarounds of major companies have been faster.”
But Galvin’s woes took place in the context of the general telecom market meltdown that has caused most major vendors to effect leadership quakes. Lucent appointed Patricia Russo, Nortel Networks Frank Dunn, and L.M. Ericsson Michael Treschow to steer their ships in the past few years with each showing positive progress in their new roles.
Analysts think the resignation will tuck the Galvin family in the background and help recast the company in less nepotistic terms, a constant motif in past shareholders’ meetings.
To this point, Motorola has made changes short of the man at the helm.
The infrastructure division has been under speculation to fall into Siemens’ arms. Nortel also has been named a possible buyer.
The company, chafing under its lack of complete systems, bought Winphoria Inc., propping up its portfolio for a better competitive edge. The absence of switches became a constant pain to the giant.
“Motorola has to accept that in the next three to five years, the equipment has to be cheaper, more flexible and more modular,” said Philip Marshal, director of mobile technologies at Yankee Group, adding that this challenge is not exclusive to Motorola, but all equipment makers. However, he stressed that it will be particularly hard for the American vendor because of its legacy equipment.
Marshall said the acquisition of Winphoria affords Motorola limited opportunities in greenfield deployments in emerging markets, explaining that the advantage goes to mature networks where switching infrastructures are already in place.
He said the prospect of a buyer for the company’s network division is grim. “Anybody who buys it will have to commoditize it,” he said, adding that only fixed-line players may be interested, especially in its radio access gear.
Motorola’s problems in the market are even more challenging as major players in next-generation contracts continue to edge the Schaumburg, Ill.-based vendor out of market-share contention.
The semiconductor unit has been entering a series of alliances to boost its standing, yet it has continued to hemorrhage. “Motorola SPS (semiconductor products segment) group should move aggressively away from reliance on its handset group for success in these markets,” suggested Strategy Analytics.
The company has not yet appointed a search team to secure a replacement, but Michael Zafirovski, its chief operating officer, is perceived as the front runner for the position.
