News Blog

In Friday's edition of the Daily Debrief, CNET News.com's Tom Krazit and I talk about the July 11 release of the iPhone 3G. Apple has been notoriously tight-lipped about the details, but Tom says there are a few known factors. For one, every customer will have to sign a two-year contract with AT&T and will have to activate the phone upon purchase in the store. Secondly--and this comes as no surprise--the lines are going to be crazy!

That said, there's a lot we still don't know. There has been great speculation over what time the phone will go on sale. Last year, it was a coordinated release at 6 p.m. in each of the United States' time zones. This year, however, given the time needed to activate the phone and the worldwide release, there's speculation they'll go on sale earlier in the day. Also unknown is how many iPhones have been manufactured and how many each customer will be able to purchase. Stay tuned!

Motorola is getting close to hiring someone to head up its soon-to-be-spun-off handset division, according to a story in The Wall Street Journal on Wednesday.

Hewlett-Packard executive Todd Bradley has emerged as one of two final candidates for the position, according to the article, which cited sources close to the situation. The newspaper reported that the other person under consideration for the position is a top telecom executive whose identity is still unknown.

Motorola, which said in March that it was spinning off the fledgling cell phone division, is supposedly considering two candidates. The Wall Street Journal contacted Bradley by phone Tuesday night, and the executive said he wasn't planning to leave HP.

"I'm happy where I am, and I'm not planning to make any changes," he said in the article.

Bradley, 49, has a long management career that includes senior positions at GE Capital, Dun & Bradstreet, Gateway, FedEx, and PalmOne. He has been with HP since 2005.

He has been known to help struggling divisions get through tough times. Specifically, helped revive HP's personal computer division by focusing on consumers with emphasis on retail sales and new, sleek laptop designs.

He also became chief executive of PalmOne when the company merged with Handspring and split into separate hardware and software companies. (PalmOne, which was the hardware company, later reverted back to its previous brand, Palm.) Bradley is credited with moving the hardware-focused PalmOne from personal organizers into smartphones, creating a new category of handheld devices.

His experience in turning around troubled divisions and companies could be put to good use as the CEO of the new independently run Motorola handset business. The company has been struggling for several quarters to regain market share and profitability.The company's products have lagged while its competitors introduce cooler more compelling handsets. The last hit Motorola had was the 2004 release of the ultra-thin Razr cell phone. Since then its new phones have essentially flopped.

Meanwhile, former competitors like Nokia gobble up worldwide market share and new entrants such as Apple strum up excitement for its iPhone.

Motorola's soon-to-be-spun-off cell phone business is in need of new blood with fresh ideas. The company has essentially been without any significant leadership since February of 2007 when Ron Garriques, who headed up that division, left. Garriques supposedly clashed over strategy with then-CEO Ed Zander, who was later forced to resign.

Best Buy, the largest consumer electronics retailer in the U.S., is getting into the European cell phone market by taking a stake in retailer Carphone Warehouse.

Best Buy, which operates 900 stores across the U.S., will pay $2.1 billion for half interest in Carphone Warehouse, the largest cell phone retailer in Europe.

Carphone Warehouse's 2,400 U.S. and European stores will be included in the new joint venture. Also included in the deal are Carphone Warehouse's Web, insurance, and airtime reselling businesses. But the company will retain full ownership of its traditional landline phone business in the U.K. and France.

The companies have already worked together on developing Best Buy Mobile, a joint venture launched in 2006 with retail stores focused on selling mobile phones. Best Buy Mobile now has 200 mobile outlets, mostly in existing Best Buy stores.

Best Buy and Carphone Warehouse have also collaborated on bringing the Geek Squad, a 24-hour computer support team, to Europe.

Motorola's executive management shakeup continues as the company replaces two more senior executives.

The company has replaced treasurer Steve Strobel with Larry R. Raymond, a former vice president and treasurer at Sears Roebuck. Strobel had most recently been working for a private equity firm.

Motorola also replaced Mike Fenger, who had been the head of mobile devices in Europe, the Middle East, and Africa. Stephen Nolan, formerly vice president of sales at Motorola for Continental Europe, will now be in charge of the EMEA region.

The changes at the top are all part of Motorola's plan to transform its leadership team and move forward, a company spokeswoman told The Wall Street Journal.

Motorola's handset business, which makes up the bulk of the company's revenue, has experienced heavy losses over the past several quarters. The company hasn't had a hit phone since its popular ultra-thin Razr. And it's been losing market share while other companies such as Nokia and Samsung have gained market share.

Amid sharp criticism from investors, the company's board of directors forced the resignation of CEO Ed Zander and replaced him with Greg Brown.

Since taking over as CEO, Brown has been shaking up the executive suite. Several top executives have left the company, including the CFO, head of marketing, and the president of Motorola's Mobile Device unit.

Soon after Brown took over, Motorola announced that it was considering splitting off the mobile device unit from the rest of the company in an effort to return value to shareholders. Brown told reporters in February at the GSMA Mobile World Congress in Barcelona that he was fully committed to the mobile handset business.

Reuters reported last week that cell phone manufacturers in Asia have expressed interest in working with Motorola's handset business. Chinese mobile phone maker ZTE was supposedly in talks with Motorola last month over a partnership, Reuters said. Xiong Hui, marketing vice president for handsets at ZTE, told Reuters during an interview at the Mobile World Congress in February that it had been "keeping in touch with Motorola on a wider cooperation."

Though they initially seemed cool to the idea, telecom gear makers in Asia are indeed interested in discussing a partnership with Motorola's handset division, according to a Mergermarket.com report cited Wednesday by Reuters.

The Motorola handset unit's steady loss of market share has generated plenty of anxiety among shareholders and plenty of fallout, including intervention by activist investor Carl Icahn; the resignation of CEO Ed Zander and phone division chief Stu Reed; and on-again/off-again declarations that Motorola is considering a spin-off of its handset business. The new report by Mergermarket.com, a mergers-and-acquisitions specialist owned by the Financial Times Group, cites a banker among its sources and describes the interested parties as "leading Asian telecommunications equipment and device makers."

The Reuters article goes on to point out that an executive with China-based phone maker ZTE told the news service at the GSMA Mobile World Congress in February that his company was "keeping in touch with Motorola on a wider cooperation."

Mobile phone maker Motorola has named Paul Liska, a former private equity executive, as chief financial officer, the company said late Thursday.

Liska, who had been a partner for private equity firms including MidOcean Partners, CVC Capital Holdings and Ripplewood Holdings, will take the top finance spot at the company starting March 1. He will replace acting CFO Tom Meredith, and he'll report directly to Chief Executive Officer Greg Brown.

Brown became CEO in January after former CEO Ed Zander was forced to step down amid pressure from investors due to the company's worsening financial situation.

Motorola has been shaking up its top management as it struggles to get its fledgling handset business back on track. The company has seen its market share in the handset market fall dramatically over the past year. The company fell from second place to third in terms of handset shipments during 2007. Meanwhile, market leader Nokia has grown market share to about 40 percent.

The biggest problem Motorola has been facing is a lack of compelling and popular handsets, especially in Europe. The company hasn't had a hit phone since the Razr. Amid the turmoil, the company announced last month that it is considering "strategic options" to get the company back on the right track, which could include selling its handset business. Still, top executives are adamant that the company does not want to sell the handset business, and it's looking for other alternatives.

Liska has experience helping get value out of businesses. While working in private equity, his task was to go in and help run companies, which were typically underperforming. And before working for private equity firms, Liska had been at Sears, where he ran its credit business. While there, he helped Sears sell the division to Citigroup in 2003 for $6 billion.

Some AT&T wireless customers in the Midwest and Southeast are having trouble accessing 3G and EDGE data services on certain handsets, the company confirmed Thursday.

Problems were reported as early as 6:30 a.m. EST, according to Mark Siegel, an AT&T spokesman. Siegel was not able to say how many subscribers have been affected or what exactly is causing the problem.

He also couldn't specify which specific handsets were having trouble accessing the data network. He would only say they were smartphone handsets. Some users on blogs and message boards have reported that the iPhone, Blackberry, and Palm Treo have all been affected. Siegel also said that some laptop users who have AT&T's PC wireless cards have also had trouble accessing the 3G and EDGE data networks.

The problem doesn't seem to be affecting subscribers in the Northeast or the far West, Siegel said. And the outage has not affected any voice services, so customers are still able to make and receive phone calls.

"We are working to identify the cause of the problem as quickly as we can," he said. "And we apologize for any inconvenience to customers."

Sky Dayton, the founder and CEO of Helio, is stepping down as the top executive of the hip cell phone company.

The company sent out a press release late Monday saying that Dayton, who also founded the Internet service provider EarthLink and Wi-Fi hotspot provider Boingo, would relinquish his CEO position. Wonhee Sull, formerly Helio's president and chief operating officer, will take over as CEO. And Dayton will become chairman of the company, replacing Jinwoo So, president of global business at SK Telecom.

Helio, a joint venture of EarthLink and the South Korean phone company SK Telecom, officially launched its service in May 2006. The company, which doesn't have its own network but instead leases capacity from Sprint Nextel, is supposed to appeal to a hip, tech-savvy youth market. The original idea for the company was to bring cutting-edge handsets and feature-rich data applications already available in Korea to the U.S.

Helio has been downplaying Dayton's departure. Brook Hammerling, Helio's spokeswoman said in an e-mail that Dayton's departure should not come as surprise, since he "loves to start things, build teams and brands and then pass the reigns onto a more day to day ops person."

The company pointed out that Dayton typically leaves his start-ups after three years. He supposedly followed similar timelines with EarthLink and Boingo Wireless. Now three years into the Helio venture, Dayton is handing the day-to-day operational reins over to someone else.

"Helio has reached a point in its development where I feel the timing is right for this change," Dayton said in a statement.

Because Helio is a privately held joint venture, it's been difficult to tell how well it's been performing financially. For the most part, the company has kept quiet about subscriber numbers and other details of its performance.

EarthLink and SK Telecom each put in $220 million into the project in the beginning. But last year, the companies agreed to contribute another $50 million to $100 million to the company.

In what appears to be an effort to deflect any speculation that Dayton is leaving because the company is in trouble, Helio has decided to share some information about its business. In today's press release it claimed that the company now has more than 200,000 subscribers. And while this is tiny compared with the millions of customers who subscribe to Verizon Wireless or AT&T, the company claims to have some of the highest average revenue per user (ARPU) in the industry, with users spending more than $85 a month. The company said it closed its first full year of operation, which was 2007, with a revenue run rate of more than $240 million based on financial figures available in December.

The company also claims its subscribers are "voracious users of its data services." For example, users send on average more than 550 text messages per month. And roughly 95 percent of Helio subscribers access the Web from their mobile phones. The company also claims that it is seeing strong uptake in customized services for its users. For instance, 60 percent of Helio customers access MySpace via their Helio phone each month. And Helio claims that 57 percent of subscribers who had the Ocean handset downloaded Helio's exclusive YouTube application within two weeks of the launch.

More detailed financial information could become available when EarthLink reports its fourth-quarter earnings on February 7.

What separates the mobile handset winners from the losers? The answer seems to be success in developing markets like China, India, the Middle East, and Africa.

On Thursday Nokia announced that it had sold a record 133.5 million mobile phones during the fourth quarter of 2007. This figure was up by more than a quarter from the same period a year earlier, boosting its overall market share to 40 percent.

Meanwhile, Nokia rival Motorola reported Wednesday that shipments of its handsets had fallen 38 percent during the quarter, pushing its market share down yet again to 12 percent, the lowest level since 2001. But Motorola isn't the only handset maker struggling; Sony Ericsson has also had trouble growing its market share. The company, which targets the high-end market in Europe, only grew its market share in 2007 by 2 points to 9 percent.

So what has Nokia been doing right and Motorola and Sony Ericsson been doing wrong? The main difference seems to be in how the companies are addressing the developing markets.

Nokia reported that it saw the strongest growth in sales in the Middle East and Africa. Shipments here were up 52.3 percent. Asia-Pacific and China also saw strong sales growth, while sales in mature markets like North America fell during the quarter.

But what is different about Nokia is that it's also been making money in these markets. For the fourth quarter of 2007, Nokia boosted profit by 44 percent, to $2.68 billion, on sales of $23 billion. While Nokia clearly benefits from the high production volumes, the company has also been aggressively working to keep costs down. This has meant changing packaging for products sold to emerging markets and closing a factory in Germany in an effort to reduce overall costs.

Meanwhile, most of Nokia's competitors, including Motorola, Samsung, and Sony Ericsson, have had problems addressing the low end of the market. Part of the problem is scale. Producing products in higher volumes allows companies to get better deals on components so that they can produce individual phones more cheaply. So as Motorola's sales volumes go down, it actually hurts the company as it tries to address the cost-competitive low end of the market.

Motorola's executives see scalability as an issue going forward. But Motorola CFO Tom Meredith said that the company also needs to build more targeted products at the right price points.

"We need to be not so much a producer of volume to get scale," said Meredith during the company's conference call with analysts and investors on Wednesday. "We've got to produce the right design point with the right features and functionality at the right cost. And if we do that, scale will be less of an obstacle than it is perhaps today."

Even though Nokia currently dominates markets like China and India, competition is on the way. Sony Ericsson on Thursday said it plans to launch four handsets over the summer that will target India, a country that added more than 8.2 million cell phone users last month. But most experts agree it will take a long time before Sony Ericsson or anyone else can catch up to Nokia.