Mobile Industry Isn't Immune From Saturation, Recession

from the trying-times dept

One-time mobile phone giant Motorola came out with its latest earnings earlier this week, and as widely expected, they weren't pretty. The company's mobile-phone business has been spiralling downward since it peaked with the hugely popular RAZR, an iconic device for which the company could never deliver a successful follow-up. Motorola is becoming a "peripheral player" in the cell phone business, and there's been plenty of speculation that the company is searching for somebody to take the unit off its hands. Moto's problems are largely of its own making, but come at a time when economic reality is pushing handset sales down across the entire industry, and they've become a major part of the story about how "the cellphone industry's best days are behind it."

The gist of the NYT piece is that in terms of mobile phone subscribers, the world is essentially saturated. In the US, somewhere around 85% of the population has a mobile phone; meanwhile, more than 50 countries have over 100 percent penetration, meaning they have more mobile subscriptions than people. So, in some sense, though growth is slowing, there is still room for more. But, besides that, saturation doesn't mean the end of the road for handset vendors. Most of their sales in countries like the US have been replacement sales for quite some time, and as consumers become more sophisticated, they just have to -- gasp -- work harder to convince them to upgrade to new devices with better features, while the economic climate means they have to pay a lot more attention to value as well. Quickly growing markets may have simplified things for the mobile industry when simply giving people access to mobile handsets and basic services was the primary goal. There's a lot of innovation left in mobile devices and services yet, but like anybody else in this environment, mobile companies aren't immune from a slowdown. Playing that off and using the poor strategy and execution of one company to paint a picture of an industry headed for the brink may not be wholly accurate.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Motorola's Handset Business On The Brink?

from the going,-going... dept

Anybody that's followed the fortunes of Motorola's mobile-phone unit over the years knows it's been a story of ups and downs. The company has had a number of blockbuster hits over the years, like the StarTAC and the RAZR, but hasn't been able to fill in the gaps between them with other successes. Now, Phone Scoop is reporting that the company is preparing to lay off up to half its staff. In addition, the company will only release a dozen devices this year, and it's dropping the Windows Mobile platform, favoring Android instead for its smartphones. The writing has been on the wall for Motorola for a while, as it struggled to follow up the iconic RAZR with another hit. Coupled with the current economic slowdown, it looks like Motorola's handset business could be headed for the deadpool, unless a buyer emerges for it. Perhaps that should be "buyer" -- there's been a lot of talk that Moto would have to pay somebody to take the business off its hands.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Motorola Trying To Block Competitors From Hiring Workers It Laid Off

from the insult-to-injury dept

We already think that noncompete agreements don't make sense for companies, but Motorola may be taking the concept to a new level. Rather than trying to stop employees from leaving Motorola to go to a competitor, it's now trying to stop employees it already laid off from going to work for RIM. Motorola had already sued RIM earlier this year for trying to entice employees to jump ship, and this followed another suit by Motorola against Apple for hiring away an exec. Maybe rather than trying to prevent employees from going elsewhere, Motorola might want to focus on improving its own offerings and its own working conditions so that this isn't even a problem? But if it's laying people off, it seems rather ridiculous to then try to stop them from joining another company.

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Is Motorola Trying To Ban Reselling Phones?

from the hopefully-not dept

We've seen video game execs freaking out about the second-hand sales market, and apparently that may be expanding to other arenas. The Register has an unnamed source (so make of that what you will) claiming that Motorola is asking people to sign contracts on a new phone that ban the buyer from reselling the phone to anyone, other than back to the manufacturer. Of course, this is an economically dumb argument. The resale market helps add value to the primary market, and allows the company to charge more for its product initially. As Mathew Ingram points out, some are suggesting that this move would violate the first sale doctrine, though that could depend on a variety of factors. I would imagine that the terms could establish the situation as a "lease" of the phone rather than a purchase, but that might be difficult to get the courts to accept. Also, my understanding of first sale doctrine was that it only applied to intellectual property -- not physical goods, so I'm not sure it would really apply here. Either way, it would seem to be dumb, whether or not it's legal. If you want to decrease interest in your product, adding such a clause seems like a reasonable way to do so.

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Dear Motorola: Instead Of Suing Competitors, Maybe Figure Out Why Employees Are Leaving

from the blame-everyone-else dept

As a company, if things aren't going well, it's often difficult to accept that some of the blame may be on your end -- which makes it especially easy to lash out at competitors, assigning blame to them. This becomes troublesome when it starts to involve lawsuits. Just a couple months ago, we noted that Motorola was suing a former exec for jumping ship to Apple. And, now the company is suing RIM for getting a bunch of Motorola employees to leave Motorola and join RIM. To any outsider, it seems clear that Motorola has some problems that make it so employees are tempted to jump to other companies. But rather than focus on figuring out how to fix that, and make things such that employees want to stick around (making cooler phones might be a good place to start), it's lashing out at competitors who are more appealing to Motorola's own employees. In the meantime, Motorola might want to check out the research that shows the free flow of employees between competitors helps spread innovation across the entire market. In other words, stop suing people because your employees are leaving, and start figuring out ways to make employees want to work for you.

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I Don't Think It's Motorola's Trade Secrets That Have Made The iPhone A Success

from the let's-be-honest-here dept

Late Friday, the news broke that Motorola was suing a former sales executive who had left Motorola and joined Apple in April. Motorola is claiming that he was sharing Motorola's trade secrets with Apple. Of course, given the directions both companies seem to be heading in with their mobile phone devices, one might think that the only "secrets" he might have shared from Motorola were about what not to do. In fact, it seems like a lot of Apple's success with the iPhone has been in ignoring many of the old rules.

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Motorola Casts Handset Business Off To Survive On Its Own

from the fly,-fly,-fly-away-little-razr dept

A few months ago there were rumors that Motorola might sell off its struggling handset division to another provider, however there didn't seem to be many interested buyers. It appears that Motorola has chosen option two instead: spin off the business to survive (or fail) on its own. The business accounts for the largest chunk of Motorola's earnings, but it is also a huge drag on earnings. Basically, the other parts of Motorola had been subsidizing the handset business. It's still rather amazing how slow Motorola is to come out with interesting handsets that people want. It had a huge success with the Startac in the 90s and then took nearly a decade before finding another hit with the RAZR. But just as with the Startac, it milked the RAZR concept for all it was worth and now is left in the dust while other firms are putting out much more innovative phones. Spinning off the business may separate it from the other parts of Motorola's business, but unless it starts designing phones people actually want, it's not going to make much of a difference.

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Columbia Professor Latest To Go On The Patent Offensive

from the very-offensive dept

Over the last year or so, we've seen two disturbing trends in enforcing patents. The first, is seeing patent holders suing a bunch of companies at once rather than just one or two, as used to be standard. They do this because they fear that some type of patent reform is coming, either via Congress or the courts. So they want to get as many patent suits in as quickly as possible. The second trend is that, rather than taking patent infringement cases through the court system (which is bound by the recent precedents set by the Supreme Court that loosen patent rules), they use a loophole: taking patent infringement claims to the US International Trade Commission (ITC). The ITC has the authority, if it believes that infringement occurs, to block the import of infringing goods. The ITC doesn't need to pay attention to what the courts say, and doesn't need to wait for the USPTO to review a patent. It can simply decide infringement occurred and ban the import of the goods. This is, effectively, the equivalent of an injunction against the product (just the sort of thing the Supreme Court said should be used more cautiously).

A Columbia professor has now picked up on both of these trends, getting the ITC to investigate 30 companies for violating her patents on LED and laser technologies. Among the companies investigated: Sony, LG Electronics, Hitachi, Toshiba, Panasonic, Motorola, Nokia, Pioneer, and Samsung. Whether or not these patents turn out to be valid, it's a cheap tactic to use the ITC rather than going to the courts to fight this battle.

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Motorola: Since We're Not Innovating, We'll Litigate Over Patents

from the suing-RIM dept

We recently noted the challenges facing Motorola, as it's been unable to continue to innovate in a way that customers desire in the handset business. Unfortunately, it looks like Motorola is choosing the all-too-common strategy among those who fail in the marketplace: they start suing for patent infringement. Motorola has now decided that since it hasn't been able to beat RIM's Blackberry in the marketplace, it's simply going to sue the company for patent infringement instead. Of course, as in any good patent nuclear war, RIM has fired back with its own patent infringement countersuit, meaning that both companies will be tied up with lawyers and judges, throwing away money that could have gone towards actually innovating and actually competing in the marketplace.

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Idle Musings: Chances Of Motorola Ditching The Handset Business Seem Slim

from the go-back-to-selling-startacs dept

There's some buzz today about a research note from an analyst firm suggesting that Motorola might ditch its struggling handset business. However, as Eric Savitz at Barron's points out, even the analyst who brought up this possibility doesn't seem to think it's likely. Motorola has really had quite a roller coaster ride in the handset business over the years. Every so often it seems to hit on a specific handset design that catches on... but then forgets that it needs to keep innovating. Remember the Motorola Startac of the mid- to late-90s? Everyone had one of those. And then, everyone else innovated past Motorola while it kept releasing the same phone over and over again with minor improvements. The same sort of thing happened in the mid-2000s, as Motorola had a hit with its RAZR phone. Again, however, all the other handset makers eventually leapfrogged (or should that be LPFRG'd) Motorola, leaving Motorola in trouble once again. The research note points out that the business is so far behind that the company might even have trouble selling off the division to a Chinese manufacturer -- the strategy Siemens used to dump its struggling handset division to Benq a few years back. At this point, it still seems unlikely that Motorola will exit the business, but it seems pretty clear that the company needs a strategy a little more long term then "let's come up with an iconic phone every 10 years and then sit back."

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Smartphones Patented... Just About Everyone Sued 1 Minute After Patent Issued

from the wasting-no-time dept

This past Tuesday, the US Patent and Trademark Office issued a patent on "a mobile entertainment and communication device." Reading the patent, you realize it describes the quite common smartphone. It's a patent for a mobile phone with removable storage, an internet connection, a camera and the ability to download audio or video files. The patent holding firm who has the rights to this patent wasted no time at all. At 12:01am Tuesday morning, it filed three separate lawsuits against just about everyone you can think of, including Apple, Nokia, RIM, Sprint, AT&T, HP, Motorola, Helio, HTC, Sony Ericsson, UTStarcomm, Samsung and a bunch of others. Amusingly, the company actually first filed the lawsuits on Monday, but realized it was jumping the gun and pulled them, only to refile just past the stroke of midnight.

As the link above explains, the patent itself is based on a bunch of continuation filings, which are commonly used by patent holders who want broad patents to cover the latest technologies well after they've already come about in the market. It would seem like the concept itself, merely combining a bunch of things that people were already talking about, should never have been granted based on the Supreme Court's recent KSR ruling that merely combining existing concepts doesn't deserve a patent. Also, as noted in the comments to the link above, it would appear that there's a fair amount of prior art. In fact, Apple even sent over some prior art concerning the patent just before it was originally supposed to be issued last summer -- but somehow patent holder's lawyers talked their way around it. In the meantime, it looks like we've got yet another case of an overly broad and obvious patent being used against a huge number of firms. I'm sure that's exactly what Thomas Jefferson expected when he created our patent system.

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Aruba Launches Counter-Offensive To Patent Suit

from the i'll-show-you-mine dept

The latest chapter in the tech patent saga comes in the form of a lawsuit by Aruba Networks against Motorola subsidiaries Symbol Technologies and Wireless Valley Communications. Aruba's lawsuit is actually a counter-offensive to a lawsuit filed in August by Symbol and Wireless Valley that accuses Aruba of infringing upon several of their patents. The punch line of the counter-suit is the revelation that, in 2003, Aruba opened its robes to Symbol during due diligence for a potential acquisition. Now, after chewing for four years on what it learned about Aruba's system, Symbol suddenly claims that Aruba's technology has, since the beginning, infringed upon Symbol's patents.

In how many ways does this case illustrate some of the insanities of the patent system? For one, patents applied for by Symbol in February 2001 were not granted by USPTO until February 2007. While prudence in patent examination is expected, six years is a lifetime in technology years. Making the assumption that the technology in question is justifiably patentable, the USPTO clearly failed Symbol: its market share in WLAN hardware has dwindled in the intervening years while Aruba's has grown strongly. Checking that assumption, it's difficult to see how technology that was simultaneously developed by no fewer than four different companies (Symbol, Aruba, Airespace, Trapeze Networks) qualifies as novel, non-obvious, and therefore patentable. But it's the entire timeline that perhaps best illustrates the lunacy. In 2001 Symbol had an idea, and Aruba Networks didn't yet exist. By 2003, Aruba was delivering its product to customers but Symbol still hadn't made it to market and was kicking the tires at Aruba. Fast forward to 2007, Symbol's market share has fallen to third place and fading behind Aruba (even holding that position largely due to sales of legacy WLAN hardware, I suspect) and suddenly it discovers that all along Aruba has been infringing upon its "invention".

It's a sad but popular refrain made possible by the soft protectionism that is the current patent system.

Daniel DiPasquo is an expert at the Insight Community. To get insight and analysis from Daniel DiPasquo and other experts on challenges your company faces, click here.

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Competitors Response To The iPhone? Can We Talk About Something Else Please!

from the oooh,-look-over-there! dept

Back on June 29th, when the iPhone launched, we had some of the experts in the Techdirt Insight Community give their thoughts on how competitors should respond. There were, as per usual with the experts in the community, some really insightful and interesting responses. From that, we've been able to sign new business helping companies formulate and execute on their latest strategies. However, it seems that not everyone is taking a proactive approach to responding to the iPhone (or, at least they're not willing to admit it publicly). Gizmodo points us to an unintentionally amusing article where Laptop Magazine tried to get four competitors to give their thoughts on the iPhone. Rather than admitting that the iPhone has really shifted how many people view mobile phones and what they can do, all of the companies basically toe the corporate line, look the other way on iPhone questions and make sure to mention their own phones as many times as possible. Given the market response, however, it seems pretty clear that Apple is delivering what the market wanted, while these other guys have not. Insisting that you do have what it takes when the market is shifting elsewhere isn't going to be a winning strategy. Of course, we're here to help. If companies want to formulate a real strategic response to the iPhone, they might want to give us a call.

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