Motorola should keep its phones

Motorola should keep its phones

The Wall Street Journal reports that three weeks after Motorola put its handset division up for sale it has no takers. Nokia, Samsung and LG aren't interested, while consumer-electronics companies aren't stepping forward.

Is that a real surprise? Considering the economics of the handset business, it's difficult to imagine Motorola can offload the struggling business very easily, especially when shareholder activist Carl Icahn believes the business is worth as much as $19 billion. The economics are tough for the competitive handset market, especially as vendors battle it out in the low-end market, where margins are narrow. Handset vendors are continually under pressure to lower prices and offer broad product lines. Then there's competition from newer players such as Chinese vendors ZTE and Huawei and of course Apple's iPhone.

Any company buying Motorola's business has the unenviable position of trying to rebuild the division. Remember when Taiwanese company BenQ bought Siemens' beleaguered handset division in 2005 with devastating consequences? The buyout was supposed to be BenQ's bridge into the mobile technologies market, but the company did not post a profitable quarter in the one-year span under BenQ control and subsequently went out of business.

Motorola is better off engineering a turnaround rather than shopping itself around. Waiting too long for a buyer can further weaken the division, giving a sense that the company isn't serious about the handset business. It's difficult to believe that Motorola's brand has been totally tarnished, despite the fact that its profit and sales have been terrible in the last year. The vendor has a track record of moving through peaks and valleys, capitalizing on designs such as the StarTac in the 1990s and the Razr, but also wallowing in its missteps, such as riding the Razr train too long. It just needs to figure out how to consistently stay in front of the pack. -Lynnette [1]