Inside Motorola's Dealmaking
Executives at Motorola (MOT) like to talk about delivering products that "wow" their customers. Well, at the company's annual meeting with analysts on July 25 it seemed to wow the audience with a series of news announcements and nifty new products, all designed to further the company's strategy of connecting people and their content wherever they roam.
Recently beaten up on Wall Street for not making acquisitions or engaging in partnerships while competitors Nokia (NOK), Cisco (CSCO), and Lucent (LU) cut deals around them, Motorola announced two key deals during the conference.
It has acquired Broadbus Technologies, which deals in the distribution of on-demand video. That transaction rounds out the portfolio owned by Motorola's home broadband unit, which sells set-top boxes and cable modems. And Motorola struck a partnership with Huawei Technologies, the high-flying Chinese wireless networking supplier.
The agreement with Huawei represents an effort to bolster the company's 3G cellular business, where it's looking to win more contracts with wireless operators. Although some analysts had said Motorola ought to buy Huawei outright, the partnership—along with the Broadbus purchase and the new phones—was nevertheless viewed as a good deal. "These are good moves," said Forrester Research analyst Charles Golvin.
BusinessWeek's Chicago deputy bureau chief, Roger O. Crockett, sat down for a one-on-one with Padmasree Warrior, Motorola's chief technology officer, to discuss the announcements and the company's strategy. Here are edited excerpts:
Why did you do the Huawei partnership, and what competitive advantage does it give you?
This is an R&D deal that really strengthens our position in UMTS [Universal Mobile Telecommunications System is a speedy third-generation wireless technology used by carriers such as Cingular Wireless]. They are very strong in UMTS, especially switching. We can benefit from that while they benefit from our strength in radio technology, brand, and sales. This deal allows us to do research and development jointly for new products and services in the market.
Why not make an acquisition rather than simply do a partnership?
We have done acquisitions, just not the blockbuster acquisitions you see in the press. We look for acquisitions that fill in gaps for us. These smaller companies bring us critical components that fill gaps in our technology portfolio. We look at what is the road map for the future—where do we want to invest, and how do we fill gaps so we can get there? The Huawei partnership accomplishes that. I don't think there is a magical acquisition that will make everything work.
What about Broadbus? What competitive advantages does that offer you?
Video on demand is going to be a big application. They are strong there. And we are looking at how do you take that video content and take it from the home to the mobile device. So we have in our connected home division expertise in video in the home. Broadbus has a server platform that complements what we do.
Cisco, via its 2005 acquisition of set-top maker Scientific Atlanta, is focusing on a similar space. Does this distinguish Motorola from Cisco?
Cisco is strong in data but not really in video. They bought Scientific Atlanta to help in video. What we are focusing on is how do you bring the experiences of the mobile world and the Internet world together. We are addressing how you bring the mobile, video, and voice world together. Others might talk about voice and data, but not about mobility. We are the only ones that can address how you enable this device that stays with you (the mobile phone) to have all the content you are used to having wherever you go. That's what we are going to do.
How do the new phones you announced fit into this strategy of seamless mobility?
We announced a new phone platform called SCPL [pronounced "scalpel" because the platform is designed to cut across all technologies] that addresses emerging markets. Seamless mobility [addresses] the idea of connecting the unconnected. There are 5 billion people in the world who have never made a mobile-phone call. And half of those people are in emerging markets such as Asia, Latin America, and Africa. SCPL is designed to be a platform for making cost-effective devices for those markets.
But we are actually innovating in this platform, too. We have developed enhanced audio to put in those phones, because it is often noisy where people use their phones in certain Asian markets, for example. Our labs in China created characters to help people navigate phones rather than relying on voice commands. We're not just stripping technology out of these low-cost phones.
All this sounds great, but you still have to execute to make all this technology pay off, right?
Absolutely. The company has really improved its execution. We can grab an idea and put it to market much quicker now. Nine times as many ideas get to market today than they did a few years ago.