November 30, 2007 3:42 PM PST
Motorola's Zander out after Razr deemed one-hit wonder
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"If you look at the company's performance the last year and beyond, it's no surprise at all," said Ellen Daley, a Forrester Research analyst. "And when the numbers came out that Samsung surpassed Motorola as the No. 2 device maker, it didn't bode well for Ed."
After just shy of three years at the wheel, Zander plans to resign his CEO position at the end of the year. He will be succeeded by Greg Brown, the current president and chief operating officer of the company.
Zander's downfall can be summed up in seven words: lack of innovation and slow to market, analysts and industry watchers say.
"I've followed Motorola for the past 15 years, and they've had the same underlying problems with efficiency and speed," said Paul Sagawa, an analyst with Sanford Bernstein.
Motorola has struggled to find an innovative replacement for its popular ultra-thin Razr. The Razr still sells fairly well for a 3-year-old phone, but rivals like Samsung and LG Electronics have rolled out their own slim, thin phones while Motorola has failed to come up with anything that has resonated with the public to the same degree.
That problem was compounded by Motorola's slow entry into the 3G, or third-generation, market, as Samsung and LG introduced several 3G phones early in the year for use over next-generation wireless networks. Motorola only recently came out with a 3G version for the Razr, and while that device, the Razr 2, was fairly well-received by reviewers, it was buried by the buzz surrounding Apple's iPhone.
Combine all that with stiff pricing competition and the company's earnings and stock price taking hits. At Friday's closing price of $15.97, Motorola's stock is slightly up compared with where it was when Zander took over, but it's down significantly from the $26 it reached in 2006 during the height of the Razr boom. And earlier this month, Motorola announced earnings that produced a profit for the first time in awhile, but sales of mobile devices were down 36 percent compared with the previous year, and the division lost money.
Last March, a dramatic change at Motorola began to emerge when outside board member Tom Meredith was named interim chief financial officer at Motorola, Sagawa said.
Meredith previously served as chief financial officer and was more recently Dell's senior vice president of business development before he left in 2001 to form his own venture capital firm, Meritage Capital.
"When he became (interim) CFO at Motorola, it marked a dramatic change at the company," Sagawa said. "At analyst meetings and on conference calls, Ed would look to Tom to add color on questions and Tom would be the one to answer questions directly. For the past eight or nine months, it's seemed that the CFO was in the driver seat."
Motorola also named Brown president and chief operating officer in March, and just a few months later named Brown to its board of directors, which struck some analysts as an unusual move given its speed and timing.
"Ed was seeming to play less and less of a direct role in the day-to-day decision-making of Motorola," Sagawa said. "So, in that sense, we have been slowly moving into a situation where Ed has been pulling out of the CEO role for a while. It was just a question of when it would happen."
In July, Business Week reported that Motorola's board was thinking about giving Zander the boot and replacing him with Brown, but Meredith denied that report in an interview with CNET News.com. A week later, Brown was appointed to the board of directors.
Motorola is comprised of three business segments: enterprise mobility, with products like two-way radios and RFID readers; home and networks mobility, which makes set-top boxes and modems (chances are you've got a Motorola box in your living room); and the mobile devices business, the boom-and-bust division that produced both the Razr and the Rokr.
Brown, who initially joined Motorola in 2003, has worked in the non-device areas of the company, such as its networks and enterprise business, now known as enterprise mobility. Before Motorola, Brown was the CEO of Micromuse, a network-troubleshooting software company that was acquired by IBM in 2005.
"People have asked me if Greg is another Ed Zander. He's not," Forrester's Daley said. "Greg is a very determined and careful speaker and analyzer. Ed is one who tends to talk off the top (of his head)."
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