Motorola splits in two, but woes only just beginning
Things are looking pretty grim for Motorola. The US giant, which used to be the world's largest mobile phone manufacturer, has decided to split itself in two, spinning off the loss-making mobile phone division as a separate company, and concentrating instead on cable-TV set-top boxes, walkie-talkies and handheld scanners.
The reason for this is that the mobile devices division is losing so much money ($1.6 billion in just 18 months) that it's in danger of dragging the company down with it. By spinning the division off as a separate company, it's hoped that it can refocus its energies onto the mobile phone market and turn itself around, while a separate Motorola that focuses on set top boxes and the like will not be hurt should the new mobile phone company ultimately fail.
Sounds simple, but Motorola really has its work cut out - the cost of splitting the company in two is estimated at $750 million, while the new mobile phone company may need up to $4 billion just to stay afloat for the next two years.
More details after the jump.
The causes of Motorola's decline
So how did Motorola find itself in this position? Simple: after the success of the RAZR, it rested on its laurels and came up with an endless stream of uninspiring mobile phones while the rest of the competition surged ahead with devices that made Motorola's phones look obsolete.
The RAZR single-handedly created a new genre of mobile phone - the designer phone - which was a major factor in its success. As a result, Motorola, thinking that the market wanted designer phones (which it did), focused purely on looks, producing endless variants of the RAZR in different colours, or weak partnerships with fashion brands such as Dolce and Gabanna.
This strategy isn't necessarily bad. Certainly other companies have done it themselves, with LG tying up with Prada, for example. However, the other mobile phone manufacturers used it as one part of their overall strategy, whereas Motorola put all of its eggs in one basket. Once the mood shifted away from designer phones towards more feature-rich phones, Motorola found itself sorely exposed, as it had no new technology to compete, and other designer phones, such as the LG Shine, were eating into the RAZR's market share alarmingly.
The power of the blogosphere
One interesting thing to note is that Motorola could have avoided this if it listened to the blogosphere. I've been almost universally harsh on Motorola for the past two years now, not just because I've been personally disappointed with their phones, but because I've also been reflecting what other tech bloggers have been saying. If somebody writes a post on how bad a phone is, I'll likely comment on it. If many people start writing the same thing about the phone, the chances are that the phone really is bad, and so I'll write even more about it.
In this way, the blogosphere echoes the thoughts of the early adopters and tech-obsessives, and while you can't base a marketing strategy solely around the thoughts of such people, you can at least gauge what the public's reaction is likely to be. And if you keep getting such a bad reaction, it shouldn't take a genius to work out that maybe you need to change your strategy!
Will Sony Ericsson be the next Motorola?
Interestingly, there's another company out there who are also in danger of going down the same route: Sony Ericsson. Their profits have fallen by 47% in the first few months of 2008, caused largely by a range of phones last year that were simply uninspiring.
After a raft of successes with their Walkman and CyberShot phones, the company simply released yet more versions of the same thing. It became boring to write about, and reading the forums it became evident that other mobile phone users (and even people passionate about Sony Ericsson) felt the same way. Sony Ericsson, too, it seemed, were guilty of resting on their laurels while Nokia, Samsung and LG upped their game.
Fortunately for the company, the new phones that are set to hit the stores this year look to be completely different from the duds of last year. The new Sony Ericsson C905 8 megapixel camera phone is causing quite a stir, while the Xperia X1 smartphone is almost as eagerly anticipated as the iPhone. As long as they get their marketing and pricing right, they should have a set of winners on their hands, which should help them avoid the predicament that Motorola finds itself in.
So there's a lesson here for the large corporations of the world. Engage with the bloggers who write about your products. Read their blogs, learn from what people are saying, and use the blogosphere as a sounding board for how people are reacting to your latest products.
If enough people say your product's crap, it probably is! Really, it can't be that difficult to figure out, surely?!
[Source: Wall Street Journal]
