Motorola Inc.’s recent loss of a huge New York City contract for emergency communications equipment is the biggest sign yet that the Sept. 11, 2001, terrorist attacks created a competitive headache for the firm that dominated the police and fire radio business for more than half a century.
The $500-million wireless broadband contract went to defense contractor Northrop Grumman Corp., which wasn’t even in the public-safety communications business a few years ago.
“This is a huge blow” to Motorola, said Karthik Nagarajan, industry manager for market research firm Frost & Sullivan.
While the Schaumburg, Ill.-based telecom equipment maker remains a strong player in the business, it’s now just one of several options for government agencies seeking the latest in emergency communications gear. It will have to fight for its share of the billions they’re spending to upgrade their communications systems.
“There are other choices out there,” said Dick Mirgon, director of technical services for Douglas County, Nev., which recently bought Motorola’s laptops but not its software for computerized dispatch of emergency workers.
Mark Moon, vice-president of Motorola’s government and commercial markets division, calls the New York loss a disappointment. But in terms of its size and specifications, New York was “a lot different than what Mississippi or Chicago might want to do,” he said. “We will learn from this experience and move forward.”
The New York City award follows Motorola’s elimination this summer from an even bigger federal project to build a wireless data network for law enforcement and homeland security. Again, the finalists for the estimated $2.5 billion job are two huge defense contractors: Lockheed Martin Corp. and General Dynamics Inc. Like Northrop, both are systems integrators, which package equipment from various manufacturers. Motorola, by contrast, offers only its own equipment.
“The successful firms are the integrators who can pick and choose the best technology rather than sticking with one brand. Technology is changing so rapidly you need a flexible approach,” said Alan Shark, executive director of the Public Technology Institute, a think tank for local governments.
Moon pointed out that Motorola won 28 of the 31 statewide contracts for interoperable communications systems awarded during the last 10 years, including a $220 million contract in Mississippi and a $75 million contract to upgrade police and fire radios in New York City earlier this year.
“In North America, we continue to grow at a rate faster than the industry,” Moon said. Motorola doesn’t disclose how much of its $36.8 billion in annual revenue in fiscal 2005 came from the public-safety business. But the business has been a reliable profit generator for a company whipsawed by ups and downs in the cell-phone business during the past decade.
About $2.1 billion in federal homeland security grants was doled out between 2003 and 2005 to fix communications snafus that occurred during the Sept. 11 attacks and the response to Hurricane Katrina. The federal government is expected to spend billions more over the next decade on digital wireless networks that offer access to law enforcement databases, video surveillance and voice communications.
Common standards
The drive to improve interoperability, which allows emergency personnel on different systems to talk to each other, has created demand for equipment based on common standards, rather than for proprietary technology. The advent of standards-based technology is “enabling other companies to compete on an equal basis,” said John Devlin, an analyst with IMS Research. “If you buy the Motorola network, you don’t necessarily need Motorola handsets anymore.”
Paul Merrion is a reporter for Crain’s Chicago Business, a sister publication to RCR Wireless News. Both publications are owned by Crain Communications Inc.
