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Telecom equipment heavyweight Motorola closed financial year 200708 with a fresh strategy aimed at streamlining operations. The 58-year-old company has split into two separate divisions: mobile devices, and networks and enterprise mobility. The split will, however, become effective in 2009.

The thinking was that individually, the businesses would achieve better operational efficiencies. And then later on, depending on the business time-frame, the handset business would be sold off. Expressions of interest (EoIs) have already been invited for this.

Creating distinct business lines is not new to the industry. What is, however, unexpected is the company's willingness to let go of its mobile phone business, which it pioneered some 25 years ago.

Telecom experts don't necessarily see this as a setback. If anything, such a "motosplit" may be just the right remedy to rationalise the business that is currently being weighed down by the not-so-profitable handset division. It is true that Motorola has been a name to reckon with, both in the networks and handset segments. However, due to intense competition, over the past few years, the US-based company has been steadily losing ground to rivals like Apple, Nokia and Research In Motion (at the top end) and LG, BenQ and others at the lower end.

The market share of Motorola's global handset business has been sliding and stands at around 10 per cent, as of June 2008, down from about 22 per cent in June 2007. During the fourth quarter of financial year 2007, the organisation suffered a loss of $1.2 billion in its handset division, while registering total earnings of only $100 million.

The split has therefore not only helped to boost the company's stock prices, which have been dipping for 15 months, but has also allowed the company to focus more strongly on its cellular phone operations.

In India, however, the split has had little impact. As Pankaj Agrawal, associate director with BDA Connect, points out, "If you look at how Motorola's Indian business is structured at present, the two divisions are already being run as distinct entities. So the split is not likely to make a big difference."

For the Indian market, Motorola's split presents a brand-new acquisition opportunity. Consumer electronics major Videocon, which recently got a pan-Indian licence to provide telephony services through its subsidiary Datacom, has already put in an EoI to acquire the approximately $3.8 billion handset business, according to Merrill Lynch.

Handsets
In India, Motorola is presently the fifth largest player in the handset market, lagging behind Nokia, Samsung, Sony Ericsson and LG, according to estimates by research firm ORG-GFK. This is because the company has been unable to customise its technology for Indian markets. "The company hasn't been very clear so far and the Indian operations have also undergone organisational and management changes," observes Agrawal.

In a bid to increase its market share, the company has been aggressively launching new handsets over the past one year. In collaboration with Reliance Communications (RCOM), it has introduced the W362, its new CDMA handset. Earlier, it unveiled a music phone, MotoROKR, which it has since upgraded to the ROKR E8, an audio player mobile device that offers access to Motorola's new music portal, MOTOMuSIC, through GPRS.

Like Nokia, Motorola targets both the lowand high-end consumer segments. Earlier, in a bid to connect the unconnected, the company had launched the C11x series of handsets for emerging markets. The C115 was the first "made in India" phone. For business users, the company offered the popular MotoRAZR. Subsequently, several versions of the same were introduced in the market, all hinging on its USP –­ "ultra-slim".

In a bid to compete in India's potential 10 million-strong smartphone market, the company has introduced the MOToZINE ZN5, which targets camera users. The company has also announced plans to tie up with Ferrari to introduce a cobranded 3G-enabled handset.

Nevertheless, Motorola has been unable to chip away at Nokia's dominant position. By the time it came up with its C11x series, Nokia had already launched several low-end phones in the market. On the high end, though Motorola made its mark with the RAZR, Nokia responded swiftly by coming up with its N and E series phones. Even in the smartphone segment, the Finnish vendor has been quick to launch the N96 to blunt the impact of Apple's iPhone.

The customer perspective in India is that, compared to Nokia's phones, Motorola's are less user friendly. According to an analyst, Nokia's phones fit into every budget and every pocket.

Motorola, however, has pinned its hopes on the MOTOZINE and MotoROKR. All in all, though it's an upward battle, Motorola is aggressively trying to keep pace.

Networks
Motorola's networks division has brighter prospects. This segment is slated to grow significantly in the coming years, driven by the entry of new players, the expansion plans of existing players and the expected launch of new technologies like Wi-Max.

The company has already bagged a $90 million GSM line expansion contract from Bharat Sanchar Nigam Limited (BSNL), under which it will ship GSM network equipment and provide network services support –­ both software and hardware –­ to BSNL in the southern region. Motorola has started executing the project.

The company is looking at other GSM opportunities as well, from service providers like Tata Teleservices, Datacom and Loop Telecom. It is also working with operators on their 2G expansion projects.

According to Subhendu Mohanty, country head, networks and home, "Motorola's key focus and strength is on the value-added side, radio frequency performance, network improvement and optimisation, etc. This is important as customers tend to pick operators on the basis of their network performance –­ superior voice quality, lower congestion, etc."

But analysts are quick to point out the chinks in the armour. Says Agrawal, "Motorola has some equipment offering gaps especially in its UMTS network equipment portfolio and is partnering with Huawei for a 3G go-to-market. Going forward, the end result and effectiveness of this partnership remains to be seen. But until the company develops its own end to end product offering, there is no way it is going to be a serious player in UMTS." (In fact, last year, Motorola was disqualified from participating in BSNL's 3G network tender.)

Mohanty, however, counters this. "It is true that we don't manufacture the switch and core part of the infrastructure, but we have an ecosystem of different partners and interact with all major manufacturers for this. So, this can actually translate itself into a strength, depending on who you are talking to."

Meanwhile, Motorola's government and public safety business division is also rapidly gaining traction. The company has recently won three contracts from Delhi International Airport, Bangalore International Airport and GMR Hyderabad International Airport for providing terrestrial trunked radio (TETRA) digital radio communication networks. Under the contract, the telecom equipment manufacturer will replace the airports' existing analog radio networks with the new IP-based mission critical ones.

The company is also engaged in talks with several other metros for deploying such systems. According to Subodh Vardhan, director sales and country head government and public safety business "After deploying the TETRA network for the Delhi Metro Rail System, we are looking at introducing services for the Mumbai Metro Rail System as well. We are also hoping to bag a contract to implement the network for the airport express line of the Delhi Metro, which is yet to be awarded, as well as a signalling and telecom contract for the Bangalore Metro Rail System."

Future plans
Motorola has four key thrust areas on the home and networks side: its revamped GSM portfolio, suite of Wi-Max products, value-added services such as network optimisation and performance services, and the home business comprising set-top boxes, cable and digital set-top boxes, DSL modems, IPTV boxes and GePON.

Cable, with over 75 million viewers, has opened up vast opportunities for the company in India. In order to offer a more improved set-top box service, the company has recently acquired the assets of two China-based communication equipment manufacturers –­ Zhejiang Dahua Digital Technology and Hangzhou Image Silicon.

IPTV services are also expected to pick up. With Bharti and RCOM set to launch services shortly, and BSNL and Mahanagar Telephone Nigam Limited extending their services, the demand for IPTV boxes is likely to rise. Consequently, Motorola is working with players in the IPTV industry for products on a trial system. According to Mohanty, they are working out an established and viable business model.

Wi-Max is also likely to gather steam in the Indian market. According to a report by IT market research firm Springboard Research, India will be the largest market for Wi-Max in the AsiaPacific region by 2012, with an estimated market share of 35.7 per cent in terms of revenue and 15.8 million subscribers.

Motorola is looking to aggressively tap into this opportunity. It has recently bid for BSNL's rural Wi-Max tender. It has already passed the technical qualifications stage and will participate in the proof of concept stage, which is expected to be completed by October or November. There are also reports that the company is undertaking trial runs for Bharti's Wi-Max network.

BSNL, moreover, is expected to launch an urban Wi-Max tender shortly. The project involves rolling out Wi-Max services in 70 cities across the country this year. The value of opportunities for the rural and urban tenders is estimated to be around $100 million each.

All in all, Motorola seems determined to improve its prospects. Armed with a fresh strategy and realigned operations, the company seems ready to do battle.