Motorola in Trouble


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Case Details:

Case Code : BSTR267
Case Length : 16 Pages
Period : 2004-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Motorola
Themes: Business Strategy
Industry : Consumer Electronics
Countries : US

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"It was like this company would make a quarter, miss a quarter; get a product out, miss something."

- Edward Zander, the CEO of Motorola, in 2006.1

"Phone manufacturers are only as hot as their last major hit — if they haven't smacked it over the fence in a while, they're in trouble. Motorola failed to follow it up with something similarly as big as the Razr."

- Carmi Levy, Senior Research Analyst at the Info-Tech Research Group, in 2007.2

"What seems clear is that their competitors are pouncing on Motorola during this period of weakness. We think Nokia is hitting them in the emerging markets while Samsung is attacking in the mature markets."

- Daryl Armstrong, an Analyst at the Citigroup, in 2007.3

Motorola's Second Quarter Disappointment

In July 2007, Motorola Inc. (Motorola), a major communications company based in the US, announced its financial results for the second quarter of 2007. The company reported a loss of $28 million4 on sales of $8.7 billion in the quarter, compared to a profit of $1.3 billion on sales of $10.8 billion in the corresponding quarter of 2006.5 Motorola blamed the disappointing results on the poor performance of its biggest business unit - Mobile Devices - where sales had fallen by 40 percent to $4.3 billion.6 The sales of the Home and Networks Mobility unit and the Enterprise Mobility Solutions unit, however, had increased by nine percent to $2.6 billion and 42 percent to $1.9 billion, respectively.7

In the second quarter of 2007, Motorola had shipped 35.5 million mobile handsets.8 In contrast, Finland-based Nokia Corporation (Nokia) had shipped 100.8 million handsets (an increase of 29 percent over the corresponding quarter of the previous year).9 As of the second quarter of 2007, Nokia was the leader in the global mobile phone industry, with a market share of 38.0 percent.10

Motorola, with a 13.0 percent market share11 was in third position, behind South Korea-based Samsung Electronics Inc. (Samsung), which with a 13.7 percent share, had overtaken Motorola for the first time (Refer to Exhibit I for the market shares of the top five companies in Q2 2007).

The fall in Motorola's mobile phone shipments was attributed to slowing demand for the company's phones in Asia and Europe. Nokia, on the other hand, witnessed an increase in demand because of the popularity of its phones in the booming markets of China and India. According to analysts, Motorola had not been able to maintain its momentum after the launch of its last successful product, the Razr, which had debuted in August 2004.

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Business Strategy Case Studies | Case Study in Business, Management, Operations, Strategies, Case Studies

1] Julie Johnsson, "Edward Zander's Motorola," Chicago Business, July 10, 2006.

2] Brad Stone, "Cellphone Envy Lays Motorola Low," The New York Times, February 3, 2007.

3] Jeffry Bartash, "Motorola's Zander Needs Some Help," www.marketwatch.com, March 22, 2007.

4] Dollars ($) refers to US dollars.

5] www.motorola.com

6] W. David Gardner, "Lower Handset Sales Hit Motorola's Second-Quarter Earnings," InformationWeek, July 19, 2007.

7] www.motorola.com

8] www.motorola.com

9] Marguerite Reardon, "Nokia's Success Highlights Motorola's Woes," http://news.com.com, August 2, 2007.

10] Marguerite Reardon, "Nokia's Success Highlights Motorola's Woes," http://news.com.com, August 2, 2007.

11] www.motorola.com

 

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