Analysts wonder whether Motorola Inc. can reconcile its handset and semiconductor businesses in light of its announcement to sell its semiconductor technology to other manufacturers, including its rivals.
“That’s where the confusion comes in,” noted Jane Zweig, chief executive officer of The Shostek Group, adding that the phone maker has yet to make a public statement on how its handset business could thrive while selling the same components to its rivals.
“What does this mean for the software division and the handsets?” she asked. “Will it achieve economy of scale for both its handset division and its customers?”
The decision to sell its chips to other manufacturers chimes in with a trend taking shape in the industry. CDMA proponent Qualcomm Inc. began selling its chips to grow the CDMA business overall.
Motorola’s position is different because it will retain its handset business along with an independent semiconductor division that will sell to both the company’ for the semiconductor division, which had its worst performance ever, with a 38-percent dive in sales.
“I think they are on the right track,” glowed Ozgur Aytar, analyst with Strategis Group. “The decision is driven by financial necessity and Motorola is differentiating itself.”
One of the areas in which the company wants to maintain an edge is the GPRS space, where it has taken steps ahead of its rivals, including Nokia Corp.
“Motorola is in front with GPRS. It’s a great entry point for our strategy from a macro-economic perspective,” said Schnell.
The company’s model is to sell pre-assembled circuit boards with all the required chips for a cell phone. This would rid its customers of the burden of assembling the chips. Motorola has not announced any partners or customers yet, and some analysts doubt if the big players would buy them.
Aytar said Motorola will not be forced out of the handset business because it already has an established brand and customers are not conhe innovative approach required of a volatile and changing economic environment.
