Ed Zander and the management at Motorola (MOT) did not get much of a bounce in their stock when they fired 4,000 people. The stock closed down .5% today at $18.19. It is not the kind of buying frenzy that greeted Dell (DELL) when it disclosed that it would cut 10% of its staff.
Dell is making progress. The price per computer went up in the last quarter. Component costs went down. Server sales were very strong.
Motorola said that its European business has been its single biggest problem. Because consumers in Europe use more multimedia functions, they tend to buy more expensive phones. Reuters quotes Zander as saying: "It’s not the unit number as much as the revenue figure you get … There’s an eco-system of applications in Europe that doesn’t even exist here." The company needs to sell more high-end phones there.
Europe may be an issue, but the company seems to be saying that it is fighting a one-front war. And, that is not true. Motorola’s marketshare worldwide is now 18% and perhaps lower. The company has no clearly articulated plan for reaching customers in emerging markets, especially India and China. Handsets for these markets have very little margin unless they are built at extremely low cost. Motorola seems to leave this matter out of its conversationa about a "come back".
If Motorola is going to become sucessful once again, it share is going to have to move back toward 25%. Europe ain’t going to get that done alone.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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