Company Overview

Look at the person to your left, then at the person to your right. Does one of them own a RAZR cell phone? It’s more than likely. Motorola’s RAZR model has sold more units than any other wireless handset in history, pulling in enough revenue to make it the company the world’s No. 3 manufacturer of cell phones.

Motorola is now best-known for its sleek, slim, and often flashy wireless handsets and accessories. Almost 70 percent of Motorola’s sales are from its Mobile Devices division, and although Sprint Nextel and T-Mobile are two of its largest American customers, about two-thirds of its business is international.

The Chicago-born company began its life as Galvin Manufacturing Company  in 1928, when former popcorn vendor Paul Galvin founded it with a plan tocreate battery eliminators that would enable early radios to run on household current. By 1929, Galvin began producing car radio receivers and developed the first handheld two-way radio for the U.S. Army in 1940. Galvin renamed the company Motorola, after its car radios, in 1947.

In the 1970s, the company’s focus began to change. Motorola began developing its first cellular phone system in 1977, acquiring data communications hardware developers Codex and Universal Data Systems in the process. Sales of its cellular systems skyrocketed in the 1980s, and in 1987, Motorola made its last car radio.

Christopher Galvin, Paul Galvin’s grandson, took over as CEO in 1997, just after a major drop in profits caused by a spike in competition within the cellular phone market. The new boss instituted a total restructuring of the company that included sales of noncore assets and layoffs of 15,000 employees. Its semiconductor operations were spun-off, as well, in 2004 as Freescale Semiconductor.

The company has gone through some painful restructuring in recent years. Among the changes were the spin-off of Motorola’s semiconductor unit and the 2006 acquisition of Symbol Technologies, a maker of logistics technologies. The company sold its automotive products unit to German company Continental in 2006 for an estimated $1 billion, and announced plans to cut an additional 7,500 jobs by the end of 2008 and a possible spin-off of its handset division, in efforts to stem further losses.
Recent purchases include embedded computing systems maker Force Computers and passive optical networking equipment maker Quantum Bridge in 2004; TV-on-demand provider Broadbus Technologies in 2006; and broadband router maker Netopia, bar-code manufacturer Symbol Technologies, and software developer Good Technology in 2007.

Also in 2007, activist investor Carl Icahn bought about 3 percent of Motorola’s shares, in a failed attempt to obtain a seat on the company’s board of directors. He had hoped to help increase the company’s debt and return cash to investors in order to counter weakened sales and profits. One of his goals occurred despite this failed attempt: the replacement of CEO Ed Zander, who—though he garnered success with the RAZR, wasn’t able to repeat the feat—was ousted in early 2008. Communications industry veteran Greg Brown was given the position.
In March 2008, Brown announced the board of directors’ decision to break Motorola’s Mobile Devices business into two independent, publicly-traded companies: Mobile Devices and Broadband & Mobility Solutions. The first company will focus on improving its handset sales and the other on network equipment, cable boxes, and two-way radios.

Brown said in a press release that he expects the divorce to allow for more more flexibility, as well as a more tailored capital structure, increased management focus, and more targeted investment opportunities for shareholders.

But until the official split in 2009, Motorola will continue operating two main lines of business in addition to its Mobile Devices segment: Enterprise Mobility Solutions, which includes mission-critical communications offered by the U.S. government and public safety sectors, and Home & Networks Mobility, which offers both wired and wireless network solutions. The company is leading the curve in efforts to develop mobile communications that cross multiple technologies such as cellular, passive optical networks (PONs), and wireless broadband. It is also a leader in push-to-talk cellular technology. Still, Motorola’s 2007 fourth quarter phone shipments dropped 38 percent over the same quarter in 2006—a result of the increasing competition from Nokia and Apple within the cellular market.