Motorola Ends 28-Year Run Spawned by Gordon Gekko’s ‘Shoe Phone’

Gordon Gekko barking orders on his Motorola DynaTAC in “Wall Street,” Zack Morris plotting his high-school schemes through the device on television’s “Saved By the Bell,” and gangster Tommy Vercetti using the same brick- shaped phone in the video game “Grand Theft Auto: Vice City.”

Motorola Inc.’s $3,995, 2 1/2-pound gadget, the first commercially available wireless phone, was the symbol of 1980s influence and power. In the years since, as mobile devices became cheaper and user-friendly enough for the masses, the industry’s pioneer rarely was able to match that iconic status.

The handset business was splintered from the company’s radio unit in January. Renamed Motorola Mobility Holdings Inc., it agreed yesterday to be bought by Internet-search and software company Google Inc. (GOOG) for $12.5 billion, ending more than 28 years as an independent wireless phone manufacturer.

“It’s a natural tendency, the new eating the old,” Edward J. Zander, Motorola’s chairman and chief executive officer from 2004 to 2008, said in a telephone interview. “The story’s written every few years in our industry.”

Motorola’s history was a series of “boom and bust” cycles, Zander said, with hit products every few years -- such as the fashion-forward Razr in 2004 -- followed by lulls. It became tougher to survive when the mobile-phone unit separated and lost its cushion as part of a larger operation, Zander said.

Industry Transformation

Motorola fell victim in this decade to a shift to smartphones laden with software features from Apple Inc. (AAPL) and Mountain View, California-based Google, said Michael Cote, whose consulting firm Cote Collaborative Inc. has advised Motorola and other U.S. handset makers and wireless carriers.

“There was a transition in the mobile handset industry from form factor to software and ecosystem, when the software on the device became more important than the physical device itself,” Cote said in a telephone interview from Chicago.

Greg Brown, the co-CEO of Motorola before the business split in two this year, said the company missed some opportunities to keep pace with changes in mobile technology.

“Motorola missed a couple of key transitions,” Brown, who is now CEO of the two-way radio company called Motorola Solutions Inc., said in an interview. “Motorola missed 2G to 3G. It missed the transition to applications and services.”

Motorola was founded in Chicago in 1928 as Galvin Manufacturing Corp. to make battery eliminators for home radios. The company started producing car radios and expanded further into communications with public-safety radios. That led to the two-way walkie-talkie and to carphones. In 1973, the company began research on a portable phone prototype, using a concept for a cellular network developed by the former AT&T Corp.

‘Shoe Phone’

The DynaTAC 8000X phone made its commercial debut on Sept. 21, 1983, after a decade of research that cost more than $100 million, according to Motorola’s website. Designers called the device a “shoe phone” because of its bulky shape.

Motorola dominated the mobile-phone industry in the U.S. until the 1990s, when it was too slow to shift to digital wireless technology, creating an opening for competitors such as Nokia Oyj. (NOK1V) Motorola’s share of the U.S. market fell to 34 percent in 1998 from 60 percent in 1994, according to a news report from that time.

The company had some success in the 1990s with the MicroTAC and StarTAC phones that folded into a more compact design. StarTAC weighed 3.1 ounces (88 grams) and was marketed as the smallest and lightest mobile phone available.

Academy Awards

Introduced in 1996 for a price of $1,000, StarTAC sold about 60 million units. To promote the device, Motorola gave special editions to Academy Award recipients in 1996, with the name of their winning category engraved in the phone.

Those flip-phones paved the way for the Razr V3, which measured 13.9 millimeters (0.5 inches) thick and gained a following among celebrities including socialite Paris Hilton and tennis star Maria Sharapova. Consumers snapped up more than 100 million Razr phones worldwide.

“It was awesome watching Tom Cruise or whoever take out the phones and use them,” said Zander, 64. “Today I watch, and it’s just amazing to me how many people are using iPhones.”

Apple swept into the market in 2007 with the iPhone, which combined the features of its iPod music player with those of a wireless phone. The device has become Apple’s best-selling product and has made the Cupertino, California-based company the world’s biggest smartphone maker.

Google followed with phones using its Android operating system reaching the market in 2008. Android is now the most-used software for smartphones, with companies including Samsung Electronics Co. (005930), HTC Corp. (2498) and Motorola making devices on the platform. Google ties Android features into its online services, such as search and e-mail.

While some of Motorola Mobility’s Android-based phones have found a following in the U.S., globally the Libertyville, Illinois-based company ranks outside the top players in the smartphone market.

“It’s a tough business,” Zander said. “It’s like the music business. You’ve got to produce hit records.”

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net;

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