Motorola CEO Jha open to software partnership

Motorola Mobility (NYSE:MMI) CEO Sanjay Jha said he anticipates the handset market will experience further consolidation in the years ahead, but does not necessarily think that handset companies will be snapping each other up. Additionally, he said Motorola might be open to the possibility of combining resources with a software company.

Motorola Mobility (NYSE:MMI) CEO Sanjay Jha

Jha

Jha said Motorola's customer and supply base is consolidating, but that consolidation can occur in various ways. "I'm not convinced that handset manufacturers acquiring other manufacturers is the best way for value to be created for shareholders," he said in a lengthy and wide-ranging interview with Fortune. "Consolidation across content manufacturers and hardware and software manufacturers--I see a bunch of different ways for this consolidation to occur, to create shareholder value and create different structures to the industry." 

The Motorola chief pointed to Hewlett-Packard's acquisition of Palm and webOS as well as Nokia's (NYSE:NOK) partnership with Microsoft (NASDAQ:MSFT) on Windows Phone 7 as examples of this. Jha said he is not sure if Motorola will remain an independent company. "I hope very much that we are," he said. "I believe our strategy is the right strategy and will deliver the shareholder value we've promised."

Interestingly, Jha did not seem to rule out the possibility of Motorola, a staunch supporter of Google's (NASDAQ:GOOG) Android platform, combining with a software company. "There are lots of opportunities for us to combine different resources and create more shareholder value," he said.

In the interview, Jha touched upon a variety of topics, including Motorola's efforts to get its Xoom tablet into more enterprises, the company's strategy for differentiating itself among Android handset makers and the nature of the handset market as a hit-device business. However, it was Jha's comments on scale that seemed most interesting, especially considering that Motorola has fallen out of the ranks of the top five handset makers, and is working to get back to consistent profitability.

"Scale is a factor in every business," he said. "But over the past 30 years the correlation of a company's profitability with market share is weak. The stronger correlation is actually with consumer loyalty."

Jha also said Apple's (NASDAQ:AAPL) massive success in the mobile industry could expose a vulnerability of the company. "I'm loath to comment on vulnerabilities of a company that has been incredibly successful in delivering world-class products," he said. "On the other hand, I would say that scale and innovation very often don't mix. Defense of market share and other defensive actions very often set in, and middle management begins to drive the culture and strategy of a company. I'm certain the folks at Apple are very cognizant and are prepared to make sure that doesn't occur. But not speaking about Apple in particular, the scale that comes with that level of success is very often the beginning of a decline."

For more:
- see this Fortune article

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