The former CEO of a struggling operator is now taking over the board of a struggling vendor. It’s probably crossed more than a few of your minds that Dave Dorman played none too small a role in SBC’s acquisition of AT&T, which eventually took his former company’s venerable moniker before he retired. Now as chairman of Motorola, he’ll oversee Moto’s split into two entities: one focused solely on handsets and the other on a diverse array of carrier, enterprise, government and consumer equipment.
Ostensibly, Dorman will be leading the search for a new CEO for the handset division, no small task, but I’d like to hold out the possibility that Dorman may orchestrate the same type of deal he helped work out with AT&T, this time selling Motorola’s ailing handset business as a package and letting its new owner abscond with the Motorola name.
These kinds of deal haven’t worked out too well in the past. Alcatel’s former handset division is now run by TCL, a Chinese company that acts more French than its former owners. The new Alcatel Mobile did land the Playboy contract, but the company hasn’t done much else. Siemens’ handset division would team up with Taiwan’s BenQ and then shut down completely. The only spun-off handset group that’s doing well is Sony Ericsson, but that was a joint venture, not a sale, and while going strong, Sony Ericsson is nowhere near the No. 2 spot in market share that Ericsson once boasted.
Perhaps you see a pattern developing here? Asian company looks to the West for a brand name and market presence. If there’s not a direct analogy in mobile phones there is certainly one in personal computing: Lenovo’s purchase of IBM’s PC division in 2004. LG Electronics and Samsung probably need no help in their quest for global market share, but there are a long list of companies from Japan and China that might: Fujitsu, Sanyo, Kyocera, HTC, UTStarcom, ZTE and Huawei to name a few. And those are just the telecom equipment vendors. If Moto’s handset spin-off has taught us anything, it’s that mobile phones are no longer a telecom equipment business but a consumer electronics business. There are any number of gadget and gizmo makers–many we’ve probably never heard of before–that might want to take a shot at the mobile phone business. A No. 3 market share isn’t a bad place to start.
Of course, Dorman probably wasn’t elected to sell off the handset business. A fire sale isn’t something Motorola has made any indication of considering. But with Carl Icahn influencing the board, Motorola will likely have to listen to any offers that come its way. Icahn gained his reputation as a corporate raider in 1985 when his hostile takeover of TWA resulted in the dismantling of the airline and assets going to the highest bidder. In the telecom industry, we know Icahn best as the man who took over XO Communications. Icahn only owns 6.3% of Moto stock now, but as part of a deal he reached with Motorolahe gets two representatives on the board. It’s doubtful an increasingly vocal Icahn would let a lucrative bid slide by unnoticed.