Executives come and go as corporate fortunes rise and fall, as surely as the sun rises and sets.
It is rare, however, that that mobility is as seamless or as wickedly cool as Ron Garriques’ departure from Motorola Inc. earlier this month.
Even as headlines reflected Motorola’s deep troubles in January, following a disastrous final quarter in 2006-a Forbes.com banner read “The Unmaking of Motorola” only six months after the vendor received accolades for its financial performance-Garriques must have been on his handset, finalizing his move to PC vendor Dell Inc., also troubled by shaky financials, but offering a fresh opportunity to ply his skills.
At that point, shortly after the Feb. 16 announcement of Garriques’ departure, a Forbes.com headline read: “Motorola’s Zander has real trouble now.”
Given that Garriques headed Motorola’s handset business, which accounted for roughly two-thirds of the company’s $43 billion in revenue last year-and that executive heave-ho is a perennial corporate option in bad times-Motorola CEO Ed Zander may have already discussed Garriques’ future with him. But Motorola’s appointment of two senior vice presidents to serve as interim co-heads of the mobile devices business suggested that events moved more swiftly than anyone anticipated.
Garriques is said by one online columnist-Joan Lappin at Gramercy Capital Management-to have called Zander early on Friday, Feb. 16, with his decision. On Monday, Feb. 19, Garriques was already at work at Dell in Texas as president of global consumer products.
Few likely know the inside details of how events actually transpired, though Garriques’ seamless mobility suggested a courtship by Dell that Garriques grabbed as need for options sharpened. But many are wondering precisely how important Garriques the man was to Motorola the corporation, and whither the latter’s fortunes now that he’s gone.
Separating leader from performance
First, how much effect did Garriques actually have on Motorola’s resurgence and how much responsibility does he bear for the company’s current slump?
Zander, who joined Motorola from Sun Microsystems in January 2004, elevated Garriques to head of mobile devices that fall, as the Razr handset launched to revive corporate fortunes. Garriques previously had led Moto’s European operations.
“That’s the funny part of this business,” said Tero Kuittinen, analyst with Nordic Partners Inc. “By the time these guys came in, the Razr design was already locked in. Those responsible rarely get the credit.”
And how much responsibility does Garriques bear for the company’s current slump?
“That’s the tricky part,” Kuittinen said. “He did a good job expanding the Razr family, but he didn’t know when to stop. That’s why I don’t see his departure as a major tragedy. He was handed a golden goose and, I won’t say he exactly strangled it, but he didn’t nurture it either. Taking a hit product and stretching it until it’s dead-I don’t think that’s very constructive, that’s not what Motorola needed.”
Carl Howe, analyst with Blackfriar Communications Inc., said it can be difficult to separate out the leadership’s performance from the corporate performance.
“Clearly, leadership is an important aspect of a company’s success,” Howe said. “You have to attribute some aspect of Motorola’s success to Ron Garriques’ leadership. So I’d say it’s a significant loss for Motorola to have him go to Dell.”
On the other hand, something clearly is amiss and it happened on Garriques’ watch, Howe said.
“You have to ask: what happened after the Razr?” Howe said. “When it hit the market it was selling at almost iPhone-like prices, now it’s almost a give-away. Has Motorola done fine at execution, but failed at marketing? Marketing reported to Garriques and, clearly, something happened. The likely answer is that the market simply got more competitive. The other challenge is that hot products come and go.”
Given Motorola’s challenge in moving beyond the Razr and its family of spinoffs, as well as reviving its margins and profits, does Garriques’ departure offer an opportunity?
Liberation, actually
The company would be “short-sighted” if it views the departure negatively, in Kuittinen’s view.
“It’s important to remember that Motorola has a lot of engineering talent,” Kuittinen said. “This departure and slump may produce a new willingness to take risks. When you have a debacle like this and margins go down, people leave and you get negative press that can liberate a company. They no longer feel obliged to ponder how to maintain double-digit margins and achieve 30-percent market share. It will drive the company to make active decisions. No longer will every model be based on the Razr platform.
“That’s exciting,” Kuittinen continued. “When Razr was created, it was because Motorola was doing badly in the high-end market. So the Razr was born of a panic response, in a way. Maybe this is just what Motorola needed.”
And how long will it take to see tangible signs of a turnaround in product design and financial health at Motorola?
Given product cycle times, exacerbated by lengthy review processes by the Federal Communications Commission and carriers, that’s really “a 2008 question,” according to Howe. Kuittinen takes a similar view.
“The coming year will be very difficult,” Kuittinen said. “The volume growth in this industry has been phenomenal for so many years. If there’s going to be any softness in the market this summer, that will coincide with Motorola’s throes. When your portfolio gets tired as growth slows, you’re in trouble.”
“I’m sure they have a variety of models in development,” Kuittinen added, “but it might take them until the middle of 2008 to produce tangible results. It could take as many as six or seven quarters to produce a new direction. I’m sure that the Christmas 2007 lineup, for example, is locked in.”
As for Garriques’ replacement, Chris Ambrosio at Strategy Analytics, said: “Executives are there for leadership and strategic guidance more than short-term execution. Motorola cannot delay in filling the position. But it is not as important for Motorola to move quickly as it is to get the right person.”
