It must be tough to give a daylong presentation to financial and industry analysts in New York when your take-aways essentially are “meet the new team,” “we can do it” and “stay tuned.”
The latter two messages are acquiring such a familiar ring that one fears the appearance of a wizened woman calling out “Where’s the beef?!” (Hey, it’s a line that has felled presidential candidates.)
Such meetings tend to be more reassuring when your CEO can wave a few new, shiny gadgets-and possibly smash them on the podium to highlight durability-as tangible proof of your message, as CEO Ed Zander did with the Razr2 in May.
But Motorola took the opportunity last week to introduce new members of its executive team, repeat its mea culpa on its past performance in mobile devices and give an upbeat assessment of the company’s outlook and the will of its employees.
Oh, and let everyone know that innovation is alive and well and there’ll be more new shiny gadgets within 30 days. Though Motorola executives, including the Energizer rabbit-like Zander, assured their audience that the company’s other divisions were thriving (remember enterprise mobility, home and network mobility and government and public safety?), most eyes were on the ailing mobile devices business, which accounts for more than half the company’s revenue.
In the spotlight
Stu Reed, Moto’s new head of mobile devices, apparently felt compelled to signal that he understood recent lessons-much discussed by everyone else in the industry-and to instill confidence that his company had taken practical steps to control its device business while moving ahead on its vision. Coining a new mantra did not hurt, nor did shooting high.
“It’s all about profitable market share,” Reed said. “Aiming for No. 1 is clearly our objective.”
“Within 30 days, there will be another wave of (device) announcements,” Reed added. “Trust me, it’s best-in-class design, coming in October. You’ll love it.”
Motorola CFO Tom Meredith even quoted legendary football coach Vince Lombardi on winning.
“Our team has the will to win,” Meredith assured his audience with a paraphrase.
And just exactly when would Moto run up the score? one analyst asked.
“I’m not giving guidance on when,” Reed replied.
More guidance on fourth-quarter projections would be forthcoming on the company’s third-quarter earnings call in October, Meredith added.
Substantively, Motorola executives said that new leadership in mobile devices had been installed in global regions such as Asia, Western Europe and Latin America, a new executive was in charge of Moto’s semiconductor needs and a new device marketing exec is in place. Operational aspects of the company, from finance to supply chain, have been improved. Previously announced cost-cutting measures such as job cuts and the reduction of other operating expenditures are on track. Disciplined pricing strategies have improved operating margins sequentially since the fourth quarter, Meredith said. The CFO said that all of Motorola’s businesses would be profitable by the end of next year.
President Greg Brown even felt compelled to declare “the business is not demand constrained,” to an audience painfully aware of Motorola’s “upside potential,” in the lingo of financial analysts.
Keeping everyone happy
One analyst asked what Motorola was doing to increase “stickiness,” or brand loyalty, among its end users, perhaps in light of Nokia Corp.’s recent news of a revived strategy to sell Internet-based content and services and, of course, Apple Inc.’s iPhone/iTunes product/service combo.
Zander did not have a ready answer. He referenced the “brand power” Motorola had achieved with its Razr handset and international opportunities to sell direct-to-consumer, before acknowledging that “it’s a challenge in a carrier-driven market” such as the United States to achieve stickiness. Acquisitions such as Good Technologies, however, would provide Motorola with a platform for services beyond messaging to include gaming and other interactive services.
“Stay tuned,” Zander said. “It’s one of our strategic thrusts.”
“We don’t want to compete with our customers,” he added, quickly. “We want to help them grow their ARPU.”
Asked by an analyst to describe concrete changes the company had undertaken to transform itself, Zander asked: “How do you get 50,000 people to ‘feel it’ every day?”
The CEO said that the company was working to instill a sense of process and accountability in executives and rank-and-file alike.
Peanut gallery
And how did these messages play with analysts?
Prior to Friday’s event, analyst Ittai Kidron at CIBC had cautioned: “expectations should remain low.” Kidron acknowledged changes in the company’s management and business processes, but noted that the uptake of Motorola’s latest products was mixed. The analyst suggested that third-quarter shipments would be “flattish” and reiterated the conventional wisdom: a long-term recovery relies on a reinvented product portfolio.
“By mid-next year the results should be visible,” Kidron said.
Tero Kuittinen, analyst at Avian Securities L.L.C., has been more optimistic than many of Motorola’s ability to recover its financial footing. He said last week’s event was “pretty generic.”
“Overall sentiment towards Motorola has bottomed out,” Kuittinen said. “They’re trying to lower expectations for third-quarter results. That fits past Motorola turnarounds, so they can deliver genuine surprises.”
But Kuittinen gave the company points for improved execution.
“I’ve been focused on carriers’ accommodation of Motorola with the Razr2 launch, both domestically and internationally,” he said. “It has been very smooth and on time, in contrast to recent Sony Ericsson launches.”
And what of the company’s touted “October surprise”?
“We’ll see vendors moving beyond the QVGA display toward iPhone-quality displays and Motorola clearly intends to be at the forefront of that trend, based on the display quality in the Razr2,” the analyst concluded. “That’s an easy, perceptible change that consumers can grasp.”
