IHS Global Insight Perspective | |
Significance | Motorola has continued to trim costs and peripheral businesses as it focuses on video networking solutions to drive growth. |
Implications | Motorola has suffered significant losses and the continued lay-offs have added heavily to charges while a turnaround in the handset business is still needed. |
Outlook | A strategy of enabling a wide range of video services will provide growth opportunities, and this may eventually help to pull up the handset unit if a vision of seamless connectivity can be attained. |
Motorola announced today that it has completed the sale of its biometric business, which includes the Printrak trademark to France-based international aerospace and defence high-technology group SAFRAN, through the wholly owned subsidiary Sagem Sécurité (see World: 15 October 2008: Motorola Sells Off Biometric Business). The information release highlights SAFRAN's legacy with the U.S. defence industry and facilities within the United States including 3,200 employees. Sagem Sécurité is present in the United States as Sagem Morpho Inc, which develops and sells biometric technologies including fingerprint, palm print, iris, and facial recognition either through original equipment manufacturers (OEM) relationships with major U.S. integrators such as Northrop Grumman and Lockheed Martin, or through its own direct relationships with customers. Customers include various federal and local civil and law enforcement agencies.
The Associated Press also reports that Motorola has sold an Israel-based unit that manufactures bomb fuses. The 50-person Government Electronics Department is being bought by Aeronautics Ltd. for an undisclosed price. Motorola spokesman Rusty Brashear noted that the sale was not triggered by recent protests against Motorola relating to the unit. It was rather part of a general portfolio-focusing exercise: "We're selling it primarily because it doesn't fit in our portfolio….We've been getting out of all our military units, except for communications." The deal is expected to close in May or June.
The focus of the product portfolio is now increasingly on communications and in particular enabling video over the network. A product launch concurrent with the above news highlights the direction in which Motorola has been aiming for the last couple of years. Motorola launched the QUE100 QAM MicroEncoder, which allows operators to translate video from analogue to digital—including video both generated and consumed—within multi-dwelling units (apartment blocks) and commercial buildings. Content such as security camera feeds can be incorporated into the digital programme line-up, allowing low-cost digital set-top boxes to be used by tenants while enabling them to have access to up to 12 channels of security feeds.
Motorola also filed a statement with the U.S. FCC this week noting that workforce reductions of around 2,800 employees approved since the filing of the company's last related 8-K (current report) filed on 21 January 2009 will result in a pre-tax charge of around US$110 million in the first quarter relating to severance costs. Additional charges of US$13 million, together with those already included in the 21 January 8-K, bring pre-tax charges in the first quarter to around US$229 million with severance costs of US$216 million for around 5,600 employees (see World: 15 January 2009: Motorola Cuts Another 4,000 Jobs as Handset Sales Continue to Drop and China: 16 February 2009: Motorola Cuts Jobs in China).
Outlook and Implications
Motorola and Sagem have travelled a long and weary path in opposite directions over the last few years. As SAFRAN/Sagem withdrew from the mobile phone and communications business, Motorola rose high on success with its handset business before suffering from a major collapse in consumer demand for its core handset products (see World: 26 October 2006: Motorola Eyes France's Sagem, Targets Europe and World: 4 February 2009: Motorola Posts Loss of US$3.6 bil. in Q4). Motorola is now taking steps to consolidate the telecommunications businesses—although this had also included plans to spin off the albatross that now drags on the rest of the business: the handset unit. This has, however, proved difficult in the current economic environment and Motorola, with the help of ex-Qualcomm executive Sanjay Jha, is currently attempting to turn the business around with a number of radical moves (see World: 31 October 2008: Motorola Posts Losses as Revenues Drop in All Segments, Handset Spin-off Postponed).
Motorola has instead moved to trim both excess capacity and non-core assets, cutting staff members and where possible selling off foreign and non-core units (see World: 1 October 2007: Motorola Sells Embedded Communications Division, World: 3 April 2008: Motorola to Close Mobile Phone Plant in Singapore, United States: 29 January 2009: Motorola Sells Turin R&D Facility, World: 16 June 2008: Motorola Cuts Research Staff, and United States: 4 April 2008: Motorola to Cut Additional 2,600 Jobs).
Where Motorola has been focusing efforts is video services and home networking, having made many acquisitions through 2006 to the start of 2008 and re-structuring the business to improve targeting this segment (see World: 18 May 2007: Motorola Acquires Modulus Video, World: 25 February 2008: Motorola Acquires Digital Cable Set-Top Box Assets in China, and World: 28 July 2008: Motorola's Home and Networks Mobility Unit to be Restructured). Motorola has been building a portfolio of products that delivers end-to-end video network solutions, where most of the focus for fixed-line network deployments currently is. The MicroEncoder product announcement also fits into a broader strategy of enabling home networking and home management solutions, with a vision of anytime connectivity to the home network that could include remote access to security video streams, although Internet Protocol would be better suited than the cable-centric quadrature amplitude modulation (QAM) solution (see World: 31 March 2009: Motorola Launches M2M Modules, Home-Management Platform and Social Touch-Screen Phone). As IHS Global Insight has noted, this could be integrated with mobile phone platforms to provide a cohesive end-to-end user experience that would boost all segments of the business, making the handset spin-off a strange strategy (from a technology, if not business/finance perspective) in the era of convergence.