Cash-rich Motorola is saving up its efforts for a post-downturn 2009

30 Oct 2008

Despite continuing net losses of US$397m in the third quarter (Q3), Motorola said it is going to look beyond this quarter and the current macroeconomic environment, and put its cash war chest of US$7.6bn to use in driving new products and a new direction.

Motorola today reported Q3 revenues of US$7.5bn, and had an operating cash flow of US$180bn.

The company said that it sold 25.4 million mobile devices, resulting in revenues of US$3.1bn.

Future Human

Motorola’s Home and Networks Mobility division recorded sales of US$2.4bn, and operating earnings rose 65pc to US$263m.

The Illinois-headquartered communications equipment giant’s Enterprise Mobility Solutions division recorded US$2bn in sales, up 23pc on last year.

“In the third quarter, we continued to expand operating margins in our Home and Networks Mobility and Enterprise Mobility Solutions segments,” co-CEO Greg Brown said.

“While we will continue to prioritise investments on opportunities for growth, we are also improving our cost structure across the company by implementing further cost reductions. The initiatives announced today, together with prior actions, will result in total estimated annual savings of US$800m in 2009.”

In terms of handset development, in an Apple iPhone-, Nokia Tube- and BlackBerry Storm-swept world, Motorola has still to demonstrate it has its innovative spirit of old. Not since the RAZR in 2005 has the company turned heads with fascinating new devices.

However, new devices such as the KRAVE ZN4 flip phone with its two layers of touch, three new ROKR music phones and various peripherals like the MotoPure and MotoVU204 Bluetooth headsets, have been well received, the company insists.

In recent days, it emerged that Motorola has plans to enter into the Google Android operating system (OS) camp in an ambitious effort to jazz up its act.

This strategy would be well-advised. The inclusion of a low-cost OS, which has massive consumer appeal, would allow the manufacturer to focus more closely on handset design and new technologies, and possibly achieve an outflanking manoeuvre on players such as Sony Ericsson and Samsung.

The ace in the pack could be newly appointed co-CEO Sanjay Jha, who it is believed is driving the technology vision of a revitalised Motorola, and could give it the renaissance it craves.

“While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009, primarily due to the macroeconomic environment, stresses in the financial markets, and the changes underway in mobile sevices,” Jha said today.

“We have made progress on various elements of the separation plan, and will continue to prepare for a potential transaction at the appropriate timeframe that serves the best interests of the company and its shareholders.

“As part of our plan to rebuild Mobile Devices, we have announced significant actions to accelerate the consolidation of our product platforms and refocus our investment and market priorities,” Jha added.

By John Kennedy

Pictured: Motorola’s ROKR phone, harking back to the company’s innovative era it is now seeking to re-capture

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years