Dennis Roberson is sitting at a large, round conference table talking about the mandate he was given three years ago to “fix” Motorola Inc.’s storied research lab.
As the conversation progresses, he reaches inside his breast pocket and pulls out a cell phone made with environmentally friendly materials and lays it on the table. A few minutes later, with the sleight of hand to match Houdini, he produces an oversized watch from the recesses of his shirtsleeve, and demonstrates how the timepiece doubles as a phone and a pager.
Next, a text-messaging device emerges from his coat pocket, then a wireless camera and then a cell phone that can access the Internet in Chinese. By the end of an hour-long conversation, a dozen gadgets have materialized from Roberson’s suit and are strewn across the white tablecloth like so many magician’s props.
As Motorola’s chief technical officer and highest-ranking engineer, Roberson could use a little magic these days. While the electronics giant hands out thousands of pink slips in an attempt to cut costs, the 52-year-old scientist has the daunting task of keeping an army of engineers motivated to conjure up incremental inventions that will help make Motorola’s products smaller, easier to use and, most important, cheaper.
“The high-tech meltdown is challenging and hurting everyone,” says Roberson. “Budgets are reduced everywhere. Certainly, we aren’t growing in the way we were. We, too, are suffering with everyone else in research.”
The company that invented the cell phone and pager hasn’t had an industry-changing breakthrough in years. Its last big gamble, the Iridium global phone system, went into bankruptcy last year after the high-priced satellite phones failed to attract enough customers. And Motorola’s big bet on “smart-card” cell phones also has disappointed.
Motorola Chief Operating Officer Robert Growney’s concession last month that the Schaumburg-based company’s sales are in a “free-fall” only increased the R&D stakes. Roberson’s team must try to restore Motorola’s magic touch in R&D at the same time that spending on such long-term projects is under increasing scrutiny.
When Roberson left his job as chief technical officer at Ohio’s NCR Corp. in 1998 to join Motorola, CEO Christopher Galvin approved a dramatic boost in research and development spending. Motorola’s investment was lagging its peers’, and the effects were beginning to show.
Motorola’s ranking among the top 10 most-inventive companies in the world, based on patents issued, took a dramatic dive in 1999, to No. 7 with 1,192 patents, after a No. 3 or 4 ranking from 1995 to 1998. In 2000, the company fell to No. 9 with 1,196 patents, far below perennial leader IBM Corp. with 2,886 patents, and behind Lucent Technologies Inc., Sony Corp. and Micron Technology Inc., according to a preliminary report from the U.S. Patent and Trademark Office.
“R&D is viewed by some as a luxury that can be postponed,” says Jules Duga, senior researcher at Battelle, an Ohio-based contract research firm. “At good companies, I don’t believe they look at it as an expense, but as an investment.”
After years of neglect, Motorola cranked up research spending under Roberson. Last year, it spent $4.44 billion on research and development, or almost 11.8 percent of sales, up from just under $3 billion, or 10.1 percent of sales, in 1998.
About 5 percent of the annual investment, or roughly $200 million last year, is allocated to Motorola Labs-a corporate entity that Roberson created when he joined the company in an attempt to centralize the most cutting-edge research.
Now research spending is coming under fire along with every other expense. After peaking in the third quarter of 2000 at $1.17 billion, or 12.3 percent of sales, R&D spending dropped to $1.14 billion, or 11.4 percent, in the fourth quarter.
San Francisco-based industry analyst Tim Long expects Motorola’s R&D spending to rise about 4 percent in 2001, to $4.6 billion. That compares with a projected 6.5 percent increase in corporate R&D spending nationwide in 2001-to a total $190.5 billion-according to the annual forecast from Battelle and R&D Magazine. Motorola declined to say what it plans to spend on R&D this year.
“It’s one of the expenses they have to watch,” says Long, an analyst at Credit Suisse First Boston in San Francisco. “But to be a successful company, they have to count on spending there.”
Roberson says one of Motorola Labs’ biggest efforts is to take costs out of cell phones.
Motorola is trying to simplify its 120 cell phone designs into a few common platforms. Scores of Motorola engineers are taking apart overdesigned cell phones and reducing the many complex parts into smaller, lower-cost components.
While licensing technology is common among research labs, Motorola’s past inclination was to shelve such inventions in case they might be useful later.
“The hardest thing is to identify those things we’re not going to pursue,” says Roberson. “It’s human nature: You don’t want to give it away if you think you might use it some day.”
“But what people realized,” he continues, “is that technology doesn’t always have a long shelf life. It’s like cabbage or lettuce: If you don’t use it right away, it spoils rapidly.”
The licenses have yet to contribute much in the way of revenue, he says, but many of the technologies are beginning to add to the company’s shrinking profit line. The initiative also gives Motorola Labs’ 1,000 engineers more freedom to reach far afield. If Motorola’s decisionmakers don’t find the invention useful, at least the company can show a return on the investment.
At the moment, two-thirds of the lab’s budget is allocated to what Roberson calls the “Hot Seven”-the Internet, faster and more powerful chips, user interfaces, software, wireless connections to and within the home, technology that will prevent dropped cell phone calls and streamlined components that will drive down product manufacturing costs.
“There’s a lot of basic research being done in materials that will permit smaller display screens on cell phones that have higher contrast and more precise definition so they’re easier to read,” says Duga. “These are things that will have a tremendous impact on our ability to communicate. But it takes a long time for these things to come to fruition.”
Sandra Jones is a reporter with RCR Wireless News sister publication Crain’s Chicago Business.
