Motorola: Still Bleeding, but New Strategies in Works

Motorola now is intent on the separation, as well as product development, international sales and, not surprisingly, more cost cuts.

“Work is well underway,” Brown said of splitting Motorola in two. The Schaumberg, Ill.-based company has hired outside advisers to help sift through intellectual property, brand, regulatory and other matters. The costs will be large, executives told analysts, but they couldn’t provide an estimate.

Even as Motorola focuses on the split, it still will create new products. The company’s portfolio “is only going to get stronger,” Brown said. That’s not just in the mobile devices division – Motorola also is cultivating its international prospects; half of its sales are coming from global customers.

“Asia represents a fantastic opportunity for us,” said Brown.

That’s because developing countries are constructing communications networks using next-generation technologies rather than copper. Remember, regardless of poor performance in the mobile devices division, Motorola is a key 4G competitor, through the home and networks mobility unit. This seems to be where much of the company’s innovation is brewing. For example, Motorola has built a new 4G platform that supports both the WiMAX and Long-Term Evolution (LTE) protocols. That would position the equipment maker to sell to different carriers – Sprint Nextel Corp. is building a WiMAX network with Clearwire Corp., for example, while AT&T Inc. will use LTE.

Motorola also secured “significant” 4G wins in Saudi Arabia and Taiwan in the first quarter, executives noted.

“Our momentum, in 4G in general, is strong,” Brown said.

Momentum in the public safety markets, on the other hand, lost steam. Motorola received fewer orders from first responders and government agencies in the United States; those organizations are turning to lower-end systems, Brown said. Internationally, however, sales grew 23 percent as Motorola won bids from entities including the Royal Malaysian Police. But the domestic segment is one “we’ll have to keep an eye on,” Brown said.

Overall, continued loss of market share means Motorola expects to clamp down on selling, general and administrative (SG&A) expenses. The company is forecasting net reductions of $540 million, said CFO Paul Liska. SG&A refers to salaries, commissions, and travel and advertising costs.

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