By Kevin Meyer
Boy those guys at Motorola really know how to run a business. Several months ago we told you about their “strategy” that included whacking R&D and then wondering why business suffered.
And if you're running a technology company that suffers from inferior products, what do you do? Cut R&D!
Motorola Labs, which developed at least two-thirds of Motorola's patents, has been cut from 1,000 to 600 researchers. Further reductions are expected this summer, according to people familiar with the matter, including 200 researchers to be laid off. Only 200 would remain in the group, the people said.
Well, they’re still wondering.
While others are looking to bulk up, Motorola is trying break up as it seeks a strategy to combat plunging sales. It has tried and failed for nearly two years to spin off its mobile-phone business, which has been in steep decline without a hit device.
Unbelievable isn’t it? I wonder what wondrous biz school taught them that “strategy.” Hey why not try spinning off another profitable piece of the company…
Motorola Inc. is exploring the sale of its biggest business unit as it seeks to split itself apart, the latest sign of the once-mighty technology giant's declining ambition in the convulsive world of telecommunications.
The division, which makes television set-top boxes and networking gear, could fetch $4 billion to $5 billion, according to people familiar with the matter.
So $4 billion or so. Not a bad sum…
The set-top-box division, which had sales of $10.1 billion last year, was built largely from Motorola's 2000 acquisition of General Instrument Corp. for roughly $17 billion. The unit's biggest competitor is Cisco, which acquired rival Scientific-Atlanta in 2005.
Oops. But presumably that division is dragging the company down.
Handsets were long Motorola's marquee business. But this year, it has been surpassed by the set-top box unit, which is called the home and network mobility division.
That business has also been hit by the economic downturn, with sales falling 15% in the third quarter from a year earlier, to $2 billion. Still, the unit remains profitable, posting operating earnings of $199 million in the period. That strong cash generation is likely what has attracted the interest of private-equity firms. TPG and Silver Lake Partners declined to comment.
Ok… Must be that strategy thing again. Buy high, sell low, right? Spin off the profitable parts of the business to create funds to support the unprofitable part.
I’m sure it makes sense to someone.