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Motorola no longer has to be at leading edge
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Author: WildC@rdThere was a time when Motorola was adamant it had to be first on the market with the technologically most advanced cell phones, but today Ron Garriques could not care less if Samsung beats him to it. The head of Motorola's mobile phone division, the world's second biggest phone maker with almost 19 percent of the global market, does not bat an eye when he looks at the latest Samsung (000830.KS) phone, which has the same shape as Motorola's thin RAZR phone except the Samsung is a 3G phone and his RAZR is not. "I can do that tomorrow, if I want to," Garriques, pointing at the Samsung model, told Reuters in an interview at 3GSM, the world's biggest wireless communications trade show. He just does not think it makes good business sense to be like his South Korean rival. Consumers will not pay a dollar more for a 3G phone than for a phone for a second-generation network, because the faster 3G networks do not offer compelling services consumers want. "Do I really want to launch a WCDMA (3G) phone with a Qualcomm (Nasdaq:QCOM - news) chip that drives up my bill of materials by $40, but which I can't sell for a higher price, and give up my profit margin?" he said. He admits this is a relatively new approach for Motorola, which always prided itself in bringing the latest technology to consumers -- it made the smallest first-generation analog phones in the 1990s, it was leading with second-generation GSM world phones around 2000 and pioneered in 3G handsets. "In the past we had to launch every product and chase every market, because we needed every opportunity. People weren't expecting great designs from us anyway," Garriques said. "We used to be a young bull and show them what we could do." RAZR HAS CHANGED EVERYTHING That has all changed with the trend-setting RAZR design, an ultra-thin model that quickly became an icon after it came out in late 2004. A range of other breakthrough designs, some thin and some round, have been launched since. "Now we choose carefully what we introduce. We develop a lot of products, but we may not launch them," Garriques said. "What we want is to grow market share quarter after quarter after quarter, and increase value for the company," he said. Analysts from market research group iSuppli estimated the RAZR generated at least one third of Motorola's fourth-quarter shipments of close to 45 million mobile phones. "Can they (Samsung) do 17 million of those?," Garriques said, pointing at the WCDMA phone from his rival, which is the world's third biggest phone maker. Large volumes help Motorola be more profitable, and that is also the reason why the company is active in the ultra-low end of the market, making phones for emerging markets which operators can purchase for less than $30. "We're driving the cost. You cannot generate healthy profits if you don't get the volume in the low end," Garriques said. In the higher end of the market the secret is not to cram the most sophisticated technology in a mobile phone, but to create a sophisticated image. For instance by painting the RAZR pink or gold and co-branding it with the likes of fashion icons Dolce & Gabbana, as Motorola has done over recent months. "The RAZR is good for three years. We've had a year, and it's good for another two years," said Garriques. Three years is at least one year longer then the average lifespan of a mobile phone model. Motorola will do more co-branding in the future, he said.
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