No Motorola business needs bold action as badly as its largest, the $11-billion cell phone manufacturing unit. Now a distant second in a business it once dominated, Motorola has operating profit margins less than half those of its biggest rivals. Cell phone manufacturing is migrating to low-cost Asian producers able to churn out cheap phones for the mass market. Cell phones themselves are morphing from a sophisticated technology into a household product subject to shifting consumer tastes and falling prices.
Decisive action on the cell phone business could take one of two forms: an outright sale of the business, or a deal with an Asian manufacturer to take over Motorola's handset production while Motorola continues to develop and license the technology and its brand name. A pair of big European cell phone makers have cut such deals in the past month.
But does this make sense? The interesting problem for all of the handset manufacturers is that virtually ALL of the growth in this market (60 million units) will be in China. According to China View (Xinhua online)Lucky Goldstar has already surpassed Motorola in the worldwide CDMA handset business and is also number one in the critical Chinese market. And they have there eyes set firmly on the GSM prize.
Motorola could hollow out their handset division, handing over manufacturing to China the way they have handed over software to Microsoft. But what is left? The Motorola brand name? Dell would have more success managing this kind of business. If Motorola truly can't figure out how to manufacture mobile phones cost effectively at an $11 billion annual run rate, maybe they should exit the business.