RCBG Archive

Motorola’s Much-Needed Comeback

Americans love a good comeback, whether it’s the Steelers pulling off a Super Bowl win in the final minute or Mickey Rourke snagging an Oscar nomination for “The Wrestler.” But for U.S. corporations, clawing your way back to the top is harder than ever.

For once-mighty Motorola (MOT), it might well be impossible. Given the current economic climate, the company’s plummeting cell-phone sales threaten to drag down its profitable divisions.

That leaves Motorola with some tough choices. When your business is on life support, layoffs and budget cuts alone don’t cut it. Like Motorola, you may be forced to re-evaluate your entire business model, shedding units and products that don’t measure up.

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Motorola’s Three Big Mistakes

Getting in on an industry’s ground floor isn’t enough.

Just ask AOL, Netscape and now Motorola (MOT).

The company recently announced it might sell off its cell phone division, dropping the very products that made the company a worldwide name.

It’s a sobering move.

Motorola, after all, developed the world’s first commercial portable cell phone, way back in 1983. It produced iconic, influential designs, including the first flip phone. Just a few years ago, Motorola’s Razr was the world’s top-selling handset.

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A New Blueprint for Cisco

Cordell Ratzlaff wants to expand the tech giant’s reach by designing products customers can love

Cordell Ratzlaff knows firsthand how top-notch product design comes to be. After all, he once worked for Apple (AAPL) and Steve Jobs, heading up the group that created the look and feel of the Macintosh operating system. But when Ratzlaff arrived at Cisco Systems (CSCO) a year ago, he found that instead of a design czar, the company had product-requirement specs. These dreary documents, crafted by engineers and marketers, tend to get crammed with countless features, with little attention paid to how the product will get used. Only at the last minute are industrial designers brought in to make an item user-friendly. Complains Ratzlaff: “It’s a 200-page document that nobody reads, but everyone spends four months arguing about. It’s like hiring the architect while the cement truck is idling outside.”

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AT&T CEO Ed Whitacre: Lord of the Rings

Edward E. Whitacre Jr. has a thing for airplane hangars. The chief executive of AT&T (T) has cut numerous acquisitions in these cavernous confines, including his $61 billion purchase of Ameritech. So when Whitacre and BellSouth (BLS) CEO F. Duane Ackerman were getting close to finalizing terms for AT&T’s proposed $67 billion acquisition of BellSouth, the two boarded their corporate jets and flew to a nondescript hangar in Memphis.

No deal lieutenants were there. No lawyers or bankers. Just Ed and Duane. Together, they worked the deal out on notepads and shook hands. “We hammered out most of the details right there,” Whitacre said in an interview. “We had a feeling that now was the time to do this.”

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Cisco’s Bold New TV Bet

Until three years ago, Cisco Systems (CSCO) steered clear of cutthroat markets for high-tech consumer gear. It stuck happily to its business of selling high-margin networking equipment to corporations and communications providers.

But Cisco changed tack and in 2003 began a slow, steady march into homes with the purchase of Linksys Group, a maker of routers for consumers. Cisco reckoned it could compensate for lower gross margins on consumer products by keeping operating costs low while cranking up sales. The experiment worked, so Cisco quietly began looking for more deals. In July it went from home offices to the living room by buying tiny KiSS Technology, a maker of networked DVD players (see BW Online, 08/05/05, “Cisco’s Link to Your Living Room”).

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How Motorola Got Its Groove Back

It’s a muggy Friday morning in mid-July and a group of Motorola Inc. (MOT) designers are gathered on the 26th floor in the company’s downtown Chicago design center. They’re looking over prototypes for a new mobile phone when CEO Edward J. Zander pokes his head in the door: “Can I come in?” Dressed casually, in jeans and a polo shirt, he quickly gets down to business. The models on the table are for the Q, a phone with a full QWERTY keyboard designed to compete with the wildly popular BlackBerry, from Research in Motion Ltd. (RIMM) (RIM).

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Vonage: Spending As Fast As It Can

Enticing customers to switch from their tried-and-true phone service to a newfangled brand costs loads of money, and Jeffrey A. Citron is on one heck of a spending spree. Citron, the 34-year-old chief executive of telecom startup Vonage Holdings Corp., has been burning millions in venture funding to market Vonage’s Net-based phone service. His message is simple: Users with broadband connections can save on their bills by hitching their phone to the Net — through a Vonage hookup. It’s called Voice over Internet Protocol, or VoIP, and customers like the economics. Vonage subscriptions have jumped 63% this year, to 700,000. Some 15,000 more jump on board every week.

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Commentary: Can The SBC-AT&T Combo Make Money?

To listen to execs at SBC Communications Inc. (SBC) tell it, the company’s $16 billion acquisition of AT&T is an obvious coup. The San Antonio local-phone giant gets AT&T Corp., the nation’s preeminent long-distance network. Along with it comes a who’s who of business clients, not to mention enough savings — $15 billion — to virtually pay for the deal. No wonder SBC CEO Edward E. Whitacre Jr. calls the deal “a great opportunity.”

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Telecom-Gear Mergers May Start to Heat Up

HAVING SURVIVED a three-year bust, the suppliers of the gear used in the world’s communications networks are facing a new challenge: the sudden and rapid consolidation of their customers.

A wave of acquisition activity among U.S. wireless and traditional fixed-line carriers — most recently SBC Communications Inc.’s agreement last week to purchase AT&T Corp. for $16 billion — is forcing the telecommunications-equipment companies to ponder their futures, including whether to do deals of their own.

Such transactions have thrust several equipment companies into the spotlight as possible targets, including Lucent Technologies Inc., Nortel Networks Corp. and Marconi Corp.

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