Motorola Inc. is replacing top executives in key markets around the globe as its share of worldwide cellphone sales falls to new lows.
In an internal memo circulated last week and obtained by Crain’s Chicago Business, Motorola named new leaders for its cellphone businesses in China, India, Europe and North America. The moves come amid growing doubts about Motorola’s plan to turn around the business and spin it off as a stand-alone company.
Motorola’s global marketshare has fallen by half in the past year, to 9.7%, and the cellphone unit has been losing money since since early 2007. Competitors are routing the Schaumburg, Ill.-based company in China and India and now threaten its dominance in the United States, where analyst Michael Walkley of Minneapolis-based Piper Jaffray & Co. predicts Motorola’s marketshare will drop to 20% this year, the lowest since 2001.
Against that backdrop, Motorola’s senior VP Bruce Brda, the highest-ranking executive in the cellphone unit, is installing new bosses in every major region of the world except Latin America:
–Motorola executive Ruey Bin Kao takes over the cellphone business in China and Taiwan, replacing Ray Yam, who remains with the company.
–Ian Chapman-Banks, an Apple Inc. and Microsoft Corp. veteran who joined Motorola three years ago and most recently oversaw its Asia-Pacific region, will lead a newly created Asia portfolio, which includes India, Japan, Australia and other parts of the region. Former India chief Malcolm Dawe will return to the United States in an unspecified capacity.
–John Gherghetta, a 21-year Motorola veteran who served as a top executive for the company’s government and public safety unit, becomes the new leader of its cellphone business in Europe, the Middle East and Africa. He succeeds Stephen Nolan, who led the region on an interim basis since Mike Fenger left for Apple Inc. in March.
–Mark Shockley, a Motorola executive in Asia, takes charge in North America, succeeding Brda, who was promoted to his current post in March.
Each of the newly appointed executives confronts a deteriorating situation. In China, where Motorola once dominated, a cellular telephone distributor told Crain’s Chicago Business the company’s marketshare has dropped to about 8% from 20% in the past year. Motorola recently lost the No. 3 spot in the fast-growing India market to Samsung Electronics Co. Ltd. of South Korea. In Europe, Motorola has fallen behind rivals offering more-advanced phones.
Perhaps most disturbing, South Korean competitors Samsung and LG Electronics Co. Ltd. are threatening to overtake Motorola in the United States, where its marketshare has fallen to about 25% from 37% in early 2007.
Brda’s memo sheds little light on Motorola’s plans for reversing the slide, and the company declined to make an executive available for an interview. A spokesman says in a statement that “we have established a new … structure focused on executing our go-to-market plans to help us win in the marketplace. We have a very deep and wide pool of talented and experienced people, a strong tradition of innovation and design, strong carrier and industry partnerships, and a powerful, globally recognized brand. These are all great assets as we aggressively deliver for our customers in 2008 and position ourselves for the launch of the 2009 portfolio.”
Too little too late?
Motorola plans to launch a new line of phones in 2009, but some wonder if it’s too late to turn around the business, which accounted for 51% of $36.6 billion in companywide sales last year.
If “you keep losing share, how do you have the scale to compete in the longer term?” says Ping Zhao, an analyst in New York for CreditSights Inc., which rates corporate debt. “One reason they made money in the past is they were so much bigger than everyone else.”
Under pressure from activist investor Carl Icahn, Motorola CEO Gregory Brown agreed in March to spin off the unit. But he has been unable to find a CEO to run the business, a sign to some observers that the problems may be too severe to fix.
“The longer this goes on, you wonder whether they’ll be able to turn it around at all,” says Piper Jaffray’s Walkley, who cut his rating on Motorola’s stock to “sell” last week as the shares hit a five-year low of $7.30.
If that’s the case, Wall Street may reject the spinoff, leaving Motorola with a difficult choice between shutting down the business, selling it cheap or spending more time and resources on an uncertain effort to revive it.
Ray of hope
Motorola rebounded from previous slumps with hit products such as the Razr. Its new Zine ZN-5, a phone with a high-end 5-megapixel camera from Kodak due out in China next month, offers a ray of hope. But the comeback trail is steeper this time.
“At one point, we thought Motorola could find a floor for the handset business,” says John Krause, an analyst with Thrivent Asset Management in Minneapolis, which cut its stake in Motorola by half in the first quarter, to 511,762 shares. “Maybe there could have been a greater focus on handsets and they could have gotten back in the game. But this thing is just dragging on.”
John Pletzis a reporter for Crain’s Chicago Business, a sister publication to RCR Wireless News. Both publications are owned by Crain Communications Inc.
