October 13, 1996
Excerpt from: Motorola: Not Invincible but Don't Write It Off
By BARNABY J. FEDER
CHAUMBURG, Ill. -- Few giant companies grow as fast as Motorola Inc. did in the early 1990s. In just the three years ending last December, sales of Motorola's semiconductors, cellular phones, pagers and other electronic equipment more than doubled, to $27 billion, and profits nearly quadrupled, to $1.78 billion.
Recently, Motorola's biggest wireless communications business, cellular telephones, has been wracked by price wars and slowing sales. And several new products, like two-way pagers and devices to allow Internet users to plug home computers into cable-television networks, have gotten off to a weak start.
When times get tough, Motorola's strategy is to tighten its belt enough to get by without sacrificing investment in the new ventures that it believes will take it to new heights. And nothing that has happened this year has led it to rethink the vision that has guided it since the 1980s of a world where people want to be able to send and receive information anywhere, anytime and in any imaginable form, from voice to high-speed data transmission.
Motorola figures that such a roomy universe of opportunity will allow it to set a goal of expanding its techno-empire at a 15 percent annual clip, doubling revenues every five or six years, just as it has for the last two decades.
Motorola's strategy -- and size -- also force it into an ever-shifting and sometimes confusing array of alliances and battles with governments, rivals and customers. Major communication and computer companies like NEC of Japan, Northern Telecom, Texas Instruments or AT&T are suppliers to some parts of Motorola, competitors to others and customers of still others.
Many cellular companies had been giving away Motorola phones for little or nothing. Their strategy increased the number of cellular users but undermined Motorola's attempt to establish Motorola as a high-value brand. It also steered many consumers away from higher-priced Motorola products that they might have purchased if given the chance, according to Motorola research.
This spring, Motorola began insisting it would provide its new, hot-selling Startac unit of wearable cellular phones only to dealers who would set up a separate display carrying all Motorola phone products and undergo training in their features.
Motorola spent "tens of millions" rolling out the plan and adding, "It's no different than what Toyota did with Lexus or Ralph Lauren does in a department store."
The whole subject of brand names and consumer consciousness is still relatively new at the company. Although well known in the 1950s and 1960s for its Quasar line of color televisions, Motorola bailed out of that business when Japanese manufacturers attacked the American market. It stopped thinking of itself as a consumer company until the late 1980s, when public interest in pagers exploded.
These days, though, building Motorola into a worldwide consumer brand has become a major goal throughout the company, one worth risks like its expensive sponsorship of the Atlanta Summer Olympics. The company has also recruited managers from consumer giants like Black & Decker and Mattel, and it welcomed John Pepper, former chief executive of Procter & Gamble, to its board.
Inside Motorola, including the company's annual report, press releases and information about new enterprises