Dear Motorola – When Life Hands You Lemons, Make Lemonade

The recession has certainly thrown a monkey wrench into Motorola’s restructuring efforts. I had been hoping for a quick sale of the handset unit or a split of the handset unit into a wholly separate publicly traded stock. I have been screaming since the third quarter of 2007 that were in a recession and Motorola needed to generate cash.

As of early November 2008, Motorola is looking at a $397 Million loss for the third quarter of 2008; and this is compared to a loss of $60 Million last year for the same quarter in 2007. Handset sales have been dropping. Overall handset sales will likely continue to drop. Motorola has had to cancel any plans of a spinoff of its handset division.

The only good news to come Motorola’s way is that Sprint has decided to keep Nextel. Funny how that has worked out. Thanks to the recession, Motorola will continue to supply handsets to Sprint to handle the Nextel division. Part of the gloom and doom news for Motorola has only been partially caused by Sprint’s past efforts to dump Nextel. With Sprint re-committing itself to Nextel, Motorola can use Sprint’s troubles as its opportunity to stabilize itself.

Thanks to the recession Motorola may have found discovered good news. Recession is always an opportunity for someone.

Motorola needs to recommit itself to its handset division otherwise the division will continue to drag down the company. My suggestion to Motorola is to plan for a rough ride until late 2010. Motorola is correct about not focusing on 2009. As I have said in past articles, the vendor community is at the tail end of this roller coaster ride. The carriers have yet to fully enter that well of uncertainty. The vendors ride behind the carriers on this ride. Hope for the best but prepare for the worse.

Motorola needs to perform an operational restructuring of the entire company. An operational restructuring will do far more than your standard financial restructuring. The company will need to find ways of tweaking every piece of the company and mine every piece of value out of the company’s development and manufacturing process. Financial restructuring does not focus on operational improvements as much as it does to focus on the internal financial controls and budgetary decisions of the company. Financial restructuring is more about telling the company it has X dollars to spend and telling the company to deal with it. Operational restructuring requires “hands on experienced professionals” turning the company around. Even Motorola’s best efforts will lead to people losing their jobs but in the end the company will survive. My suggestion to Motorola: Hire operational restructuring experts who know the telecom sector intimately.