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Motorola, Inc.

Motorola, Inc.

1303 East Algonquin Road
Schaumburg, Illinois 60196
U.S.A.
Telephone: (847) 576-5000
Toll Free: (800) 262-8509
Fax: (847) 576-5372
Web site: http://www.motorola.com

Public Company
Incorporated: 1928 as Galvin Manufacturing Corporation
Employees: 133,000
Sales: $30.9 billion (1999)
Stock Exchanges: New York Midwest London
Ticker Symbol: MOT
NAIC: 334210 Telephone Apparatus Manufacturing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334290 Other Communications Equipment Manufacturing; 334413 Semiconductor and Related Device Manufacturing; 334418 Printed Circuit Assembly (Electronic Assembly) Manufacturing; 334419 Other Electronic Component Manufacturing; 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing

Electronic communications pioneer Motorola, Inc. is a leading designer and manufacturer of cellular phones, cordless phones, two-way radios, pagers, cable modems, broadband set-top boxes, and other communications products and systems. The company is the worlds number two maker of mobile phones (trailing Nokia Corporation), with a market share of about 17 percent, and is number one worldwide in two-way radios. Through its Semiconductor Products Sector, Motorola is also the worlds leading producer of embedded processors, with an emphasis on such high-growth areas as wireless communications, transportation, and Internet networking. Additionally, Motorolas Integrated Electronic Systems Sector designs and manufactures a wide variety of electronic components and systems for the automotive, computer, industrial, transportation, navigation, energy, consumer, and lighting markets. Nearly 60 percent of Motorolas sales are generated outside the United States. Motorola has gained recognition over the years for its emphasis on quality, for which it garnered the first annual Malcolm Baldrige National Quality Award in 1988, and for its innovative employee welfare and training programs.

Origins in Radio Technology

The story of Motorola is that of a U.S. classic. It begins during the 1920s, when a small-town Illinois boy, Paul Galvin, went to Chicago to seek his fortune. Galvin had returned from World War I with an interest in the technological changes of the time. In 1920 he worked for a Chicago storage-battery company, and one year later he opened his own storage-battery company with a hometown friend, Edward Stewart. After two years of rocky operations, the government closed the business for nonpayment of excise taxes.

The former partners, undaunted by this setback, joined forces again three years later when Galvin bought an interest in Stewarts new storage-battery company. But with the rise of electric power, batteries lost popularity with the public. To keep their business afloat, Stewart created a device that allowed a radio to be plugged into an ordinary wall outlet, aptly named thebattery eliminator.Once again, the storage-battery company failed, though Galvin was able to buy back the eliminators at the companys public auction. Joe Galvin joined his brother Paul at this time to peddle the eliminators to various retail distributors, such as Sears, Roebuck and Company. In 1928 Paul formed the Galvin Manufacturing Corporation with five employees and $565, and continued making battery eliminators.

During the Great Depression, Galvin Manufacturing Corporation found itself burdened by inventory that it could not sell because of restricted market conditions and underselling by other manufacturers. To rectify this situation, Galvin began experimenting with the virtually untouched automobile-radio market. Before this time, automobile radios had been deemed impractical because they had very poor reception. The first commercially successful car radio came out of Galvin Manufacturing in 1930 under the brand name Motorola. The name, coined by Galvin, was a hybrid ofmotorandvictrola.The units sold for about $120 including accessories and installation, which compared favorably with the $200-$300 custom-designed units then available.

During the 1930s the company also established its first chain of distributorships (Authorized Motorola Installation Stations), began advertising its products in newspapers and on highway billboards, and started to research radios to receive only police broadcasts. The market for police radios appeared so promising that the company formed a police radio department. In 1937 Galvin Manufacturing entered the home-radio market, introducing the first push-button tuning features.

In 1936, after a tour of Europe with his family, Galvin returned home convinced that war was imminent. Knowing that war could provide new opportunities, he directed the companys research into areas he felt could be useful to the military. The Handie-Talkie two-way radio and its offspring, the Walkie-Talkie, resulted. Used by the U.S. Army Signal Corps, these were among the most important pieces of communications equipment used in World War II.

Galvin was always concerned with the welfare of his employees, and in 1947 he instituted a very liberal profit-sharing program that was used as a model by other companies. By this time, the company employed around 5,000 people and had formed an early human relations department. The companys good labor relations enabled it to remain nonunion throughout its history. After Galvins son Robert and Daniel Noble, an engineer who would eventually have a tremendous impact on the future of the company, joined the company in 1947, its name was officially changed to Motorola, Inc.

The first Motorola television was introduced that same year. It was more compact and less expensive than any competing modelsMotorola charged $180, while its nearest competitor charged more than $300. The MotorolaGolden Viewset became so popular that within months of its introduction the company was the fourth largest seller of televisions in the nation.

Later in 1947, Motorola bought Detrola, a failing automobile-radio company that had manufactured car radios for the Ford Motor Company. The purchase was made on the condition that Motorola retain Detrolas contract with Ford. This deal greatly strengthened the companys automobile-radio business. Motorola subsequently supplied 50 percent of the car radios for Ford and Chrysler as well as all of the radios for American Motors.

Postwar Shifting of Emphasis to Electronics

The creation of the transistor in 1948 by Bell Laboratories marked a major turning point for Motorola. The company had concentrated on the manufacture of consumer products, and Paul Galvin felt that the company was unequipped to enter the transistor and diode field. With his son Robert and Dan Noble advocating the companys expansion into this new market, however, a semiconductor development group was formed. The first Motorola product to result from this effort was a three-amp power transistor, and later a semiconductor plant was constructed in Arizona. Following this expansion, Motorola supplied transistors to other companies for use in products that Motorola also manufactured. In effect, Motorola found itself in the awkward position of supplying its competitors with parts.

During the 1950s, Motorola became involved in the Columbia Broadcasting Systems failed entry into the color television industry. Motorola used the CBS-designed and produced color tubes in its color television sets. After a convoluted struggle for approval from the Federal Communications Commission (FCC), the CBS system was rejected in favor of a system developed by the Radio Corporation of America (RCA). Despite this setback, Motorola pioneered many new features in television technology, including a technique for reducing the number of tubes in black-and-white sets from 41 to 19.

By the middle of the decade, Paul Galvin realized that the company had become too large for one man to continue making all the decisions. He granted divisional status to various businesses, giving each its own engineering, purchasing, manufacturing, and marketing departments and regarding each as an individual profit center. This was the beginning of Motorolas famous decentralized management scheme. As part of this reorganization, Robert Galvin became president and each divisional manager, an executive vice-president. Paul Galvin became chairman of the board and CEO, which he remained until his death in 1959, whereupon Robert Galvin took over the company leadership. Beginning in 1958, Motorola became involved in the U.S. space program. Virtually every manned and unmanned space flight since that time utilized some piece of Motorola equipment.

Motorola made several acquisitions during the 1960s that left observers baffled. It purchased, and sold almost immediately, Lear Inc.s Lear Cal Division, which manufactured aircraft radios. This was followed by the purchase and subsequent divestment of the Dalberg Company, a manufacturer of hearing aids. Acquisitions were also considered in the fields of recreation, chemicals, broadcasting, and even funeral homes. This trend continued into the 1970s and constituted a period of real adjustment for Motorola. Nevertheless, three very important corporate strategies grew out of this floundering.

Company Perspectives:

As we begin a new century, we are confident that we can continue to improve on our ability to reach the objectives that create value at an attractive rate for our stockholders. We intend to build on what we have done best since the founding of the corporation-linking peoples dreams with technologys promise. We intend to listen even more attentively to those dreams and respond even more creatively. We intend to differentiate, simplify and reinvent industries made possible by technologys promise. We intend to extend human capabilities as we harness the power of wireless, broadband and the Internet to deliver end-to-end network, embedded and chip-based solutions for the individual, the workteam, the vehicle and the home.

First, the company began to expand operations outside the United States, building a plant in Mexico and marketing Motorola products in eight countries, including Japan. An office in Japan was opened in 1961, and in 1968 Motorola Semiconductors Japan was formed to design, market, and sell integrated circuits. Second, Robert Galvin instituted several progressive management policies. In 1974 the company launched an employee training and involvement program that emphasized teamwork and empowered workers at all levels to make decisions. Such policies laid the groundwork for Motorolas much-touted quality and efficiency gains of the 1980s. Third, in the late 1970s, Motorola gradually began to discontinue its consumer-product lines in favor of high-tech electronic components.

Motorolas radio and television interests were the first to go. In 1974 Motorola sold its consumer products division, which included Quasar television, to the Matsushita Electric Industrial Company of Japan. That year Motorola also unveiled its first microprocessor, the 6800. Three years later the company acquired Codex Corporation, a data-communications company based in Massachusetts. In 1978 Universal Data Systems was added. Motorola began phasing out its car-radio business at the end of the decade, and made its last car radio in 1983. These maneuvers were intended to concentrate Motorolas activities in high technology.

1980s: Four Phase, Cellular Phones, and TQM

Motorolas largest acquisition theretoforeand one of the most important in company historycame in 1982 with its purchase of Four-Phase Systems, Inc. for $253 million. A California-based manufacturer of computers and terminals, Four-Phase also wrote software for its own machines. The purchase puzzled observers because Four-Phase was in serious trouble at the time. Though Four-Phase did quite well in the 1970s, by the end of that decade its product line was aging, its computer-leasing base had grown too large, and its debt was tied to the rising prime rate. These problems had their origin in the companys insistence upon manufacturing its own semiconductors instead of purchasing commercially available componentsan insistence that consumed time and money, and also meant that new product developments at Four-Phase were slow in coming. Motorola, however, was looking for a custom-computer manufacturer and was impressed with the sales force at Four-Phase: Motorolas grand strategy was to branch into the new fields of office automation and distributed data processing.

Distributed data processing involved the processing of data through computers that were geographically distributed. The purchases of both Four-Phase and Codex made perfect sense when viewed in light of Motorolas intent to enter this field. The plan was simple: data processing provided by Four-Phase computers would be linked by data-communications equipment provided by Codex, and Motorola proper would provide the semiconductors and much of the communications equipment for the operation. The goal was to create a fully mobile data-processing system that would allow access to mainframe computers from a pocket unit. Motorola also figured that its experience in portable two-way radios and cellular remote telephone systems would prove valuable in this endeavor. Although Motorola was able to turn Four-Phase around temporarily, Four-Phase lost more than $200 million between 1985 and 1989.

The cellular remote telephone system was developed by American Telephone and Telegraphs Bell Laboratories in the early 1970s. The system functioned by dividing an area into units, or cells, each with a low-level transmitter that had 666 channels. As a driver using a phone moved from cell to cell, his call was carried on the transmitter in each successive cell. After he left a cell, the channel he was using became available for another call in that cell. (Earlier remote systems relied on a powerful transmitter covering a large area, which meant that only a few channels were available for the whole area.) Motorola aided in the design and testing of the phones and supplied much of the transmission-switching equipment. In 1983 the companys first cellular telephone network began commercial operation, following 20 years and $200 million in development.

Key Dates:

1928:
Paul Gal vin forms Gal vin Manufacturing Corporation, initially making battery eliminators.
1930:
Company introduces the first commercially successful car radio under the brand name Motorola.
1947:
Company institutes a very liberal profit-sharing program, introduces its first television, and changes its name to Motorola, Inc.
1959:
Robert Galvin, son of Paul, takes over company leadership upon the death of his father.
1974:
Motorola sells its consumer products division, including Quasar television; unveils its first microprocessor, the 6800; and launches an innovative employee training and involvement program.
1977:
Codex Corporation, a data communications company, is acquired.
1978:
Universal Data Systems is acquired.
1982:
Company acquires Four-Phase Systems, Inc., a maker of computers and terminals and a software designer.
1983:
Company makes its last car radio; Motorolas first cellular telephone network begins commercial operation.
1988:
Motorola is awarded the first annual Malcolm Baldrige National Quality Award; George Fisher succeeds Galvin as CEO.
1993:
Gary L. Tooker takes over as CEO.
1997:
Christopher Galvin, son of Robert, is named CEO.
1998:
Motorola undergoes major restructurings, creating a new divisional organization, consolidating operations, cutting the workforce by about ten percent, and taking a $1.95 billion charge.
1999:
The $5 billion Iridium satellite phone venture enters bankruptcy protection.
2000:
Company acquires General Instrument Corporation, the leading maker of broadband set-top boxes, in a $17 billion stock swap.

Motorolas early estimates of the cellular phone market seemed astronomicalone million users by the early 1990sthough in fact there were more than four million users by 1989. However, the system developed major problems. There were massive licensing and construction problems and delays. Added to this were complaints about the quality and reliability of Motorolas phones compared to Japanese-manufactured remote phones. A surplus of phones, coupled with the desire to capture a large market share, soon prompted Japanese companies to cut their prices radicallysome by as much as half. Motorola went straight to the U.S. government to request sanctions against the Japanese companies. In 1986 the Commerce Department declared that eight Japanese companies were in factdumpingtheir products (selling at a below-cost price) and were liable to pay special duties. This gave Motorola a new edge in the cellular-phone marketit soon became the worlds top supplier of cellular phones, though the competition remained intense.

Motorolas relations with Japanese companies has been checkered. In 1980 it formed a joint venture with Aizu-Toko K.K. to manufacture integrated circuits in Japan. Two years later Motorola acquired the remaining 50 percent interest in the company from Aizu-Toko and created Nippon Motorola Manufacturing Company, a successful operation run along Japanese lines mostly by Japanese. Also in 1982, Motorola received a $9 million order for paging devices from Nippon Telegraph and Telephone. These ventures were followed by vigorous pleas from Robert Galvin for the U.S. government to respond in kind to Japans trade tactics. In fact, Galvin was a founder of the Coalition for International Trade Equity. This organization lobbied Congress for legislation that would impose tariffs on foreign companies subsidized by their governments. Motorola further called for a surcharge on all imports to reduce the U.S. trade deficit. Other major companies in the United States (Boeing and Exxon among them) rejected these measures on the grounds that they would spark trade wars that would damage the position of U.S. companies doing business with Japan.

In 1986, Motorola made a groundbreaking deal with Japans Toshiba to share its microprocessor designs in return for Toshibas expertise in manufacturing dynamic random access memories (DRAMs). Prior to this arrangement, the Japanese had driven Motorola, along with nearly every other U.S. semiconductor company, out of the DRAM market.

In 1988, Motorola took on the Japanese in another way: that year its Boynton Beach, Florida, plant began producing the companys Bravo model pocket pager in a fully automated factory. The prototypical facility used 27 small robots directed by computers and overseen by 12 human attendants. The robots could build a Bravo within two hours of the time an order was received at corporate headquarters in Schaumburg, Illinois; the process normally would take three weeks.

Motorolas adoption of Total Quality Management (TQM) principles during the 1980s furthered that push for quality and earned it the admiration of analysts and competitors alike. Building on the foundation laid by his employee empowerment programs of the 1970s, Robert Galvin was able to instill a drive for continuous quality improvement in his teams of workers. From 1981 to 1986, Motorola reduced its defect rate by 90 percent. By 1992, the company had achievedsix sigma quality: less than 3.4 mistakes per million. The corporation did not sacrifice productivity for these quality improvements, either: from 1986 to 1994, sales per employee increased 126 percent, in spite of a net increase in the workforce. Some divisions had achieved such high quality rates that they were striving to reduce error rates to defects per billion in the 1990s. The corporations ongoing goals were to reduce error rates tenfold every two years and simultaneously reduce production time tenfold every five years. Motorolas campaign for quality was highlighted by its 1988 receipt of the first annual Malcolm Baldrige National Quality Award. That year, George Fisher succeeded Robert Galvin as CEO, becoming the first non-Gal vin to head the company.

In 1989 Motorola introduced the worlds smallest portable telephone, but soon found that its new product was excluded from the Tokyo and Nagoya markets, two cities that together represented more than 60 percent of the $750 million Japanese cellular phone market. When Motorola cried foul, the Japanese government agreed to allow adapted Motorola phones in Tokyo, but only for use in automobiles. This excluded the 90 percent of portable phones used on trains. In response to these restrictions, Motorola led the push to impose trade sanctions on certain Japanese imports. Then-President George Bush publicly accused Japan of being an unfair trading partner and threatened to take punitive action if the Japanese did not remove barriers to free trade.

The growth of the computer industry provided both opportunities and challenges for Motorola. Throughout the 1980s, the companys most popular 68000 family of microchips powered personal computers (PCs) and workstations built by Apple Computer, Inc., Hewlett-Packard Company, Digital Equipment Corporation, and Sun Microsystems, Inc., among others. Upstart competitor Intel Corporation, whose chips were the cornerstone of International Business Machines Corporation (IBM) and IBM-compatible PCs, launched a successful campaign to capture the microchip market. Intel combined ever-increasing power and speed with aggressive marketing to win the semiconductor market from Motorola. Undaunted, Motorola teamed up with industry giants Apple and IBM to develop the PowerPC in the 1990s. Throughout most of the 1990s, Motorola maintained the number three ranking among the worlds semiconductor manufacturers, behind Intel and Japans NEC Corporation.

1990s and Beyond: Communications Coming to the Fore

In many respects, however, Motorolas computer chip operations were eclipsed by its communications interests during the 1990s. The companys 45 percent leading share of the global cellular phone market and whopping 85 percent of the worlds pager sales forced it to place an increased emphasis on consumer marketing in the early 1990s. Accordingly, Motorola recruited market specialists from General Electric, Black and Decker, Apple, and (as Fortune put it in a 1994 article)even Mattel.The company began selling its pagers at mass merchandisers and offering them in a variety of colors. Evidence of its reentry into the consumer market after nearly 20 years came in the form of a 1993 television and print campaign targeted at women (especially mothers).

Over the course of the 1980s, Motorolas sales and profits tripled, to $9.6 billion and $498 million, respectively, in 1989. By 1993, sales vaulted more than 56 percent to $16.96 billion and earnings more than doubled to over $1 billion. The company underwent its third transfer of power that year, when Robert Galvinretiredto the office of chairman of the boards executive committee at the age of 71, at the same time that Fisher left to take the top spot at Eastman Kodak. Gary L. Tooker, former president and chief operating officer, advanced to the chief executive office, and Galvins son Christopher assumed Tookers responsibilities.

Although some analysts worried that Motorola, like many other large, successful corporations, would fall into complacency, that fear did not seem well founded. The company earned a reputation forself-obsolescencethat seemed likely to keep it in the vanguard of wireless communication. For example, the Motorola Integrated Radio Service (MIRS) combined features of cellular phones, pagers, and two-way radios in a system that could rival all three. Motorola hoped to undermine the cellularduopoliesorganized by the Federal Communications Commission by operating the system over Specialized Mobile Radio (SMR) frequencies that had been limited to use by taxis and tow trucks. Motorola also continued work on its multibillion-dollarIridiumproject (launched in 1990 then spun off as a limited partnership), a plan to wirelessly interconnect the entire globe through a system of low-earth-orbiting satellites (LEOS), with a projected completion date of 1998.

Continuing globalization at Motorola focused on Asian, Eastern European, and Latin American markets in the early 1990s. In 1993, the company announcedCorporate Americas biggest manufacturing venture in China: two plants for the manufacture of simple integrated circuits, pagers, and cellular phones. By 1995 sales in China and Hong Kong had almost doubled, reaching $3.2 billion, nearly 12 percent of overall Motorola revenues.

The good times at Motorola lasted through 1995, a year in which the company posted profits of $1.78 billion on sales of $27.04 billion. The latter figure was nearly triple the companys 1989 revenue figure. Then, seemingly, Motorola took a sudden downturn. Revenue growth slowed dramatically and profits fell. In 1997 the company reported net income of $1.18 billion on sales of $29.79 billion. There were numerous reasons for the downturn, including price wars in and declining sales of cellular phones, slumps in the semiconductor and paging industries, troubles at Apple Computer which impacted sales of the PowerPC chip, and the Asian economic crisis which began in 1997. Perhaps most importantly, however, Motorola seemed to have lost its ability to stay on the cutting edge of technology, particularly in the wireless telephone field. Motorola had dominated the wireless world in the analog era, but it was not fully prepared when the switch to digital technologies began in the mid-1990s. Because it hung onto its cellular technology for too long, its share of the U.S. wireless phone market plunged from 60 percent in 1994 to 34 percent in early 1998.

In the midst of these travails came another leadership change. In January 1997 Tooker moved into the chairmanship, while Christopher Galvin took over as CEO. The appointment of Galvin, whose background was in marketing and management rather than engineering, was well-timed; a number of observers had concluded that Motorolas troubles stemmed at least in part from its inability to listen to its customers. The companys autonomous divisions were creating productsmany of them innovativewithout first determining if the market desired them. The autonomous structure created further problems. Motorolas paging, cellular, two-way radio, and satellite communications units operated as separate divisions, and in the companys decentralized structure did not collaborate with each other, despite the increasing amount of overlap in these technologies. Galvin attempted to address these problems through a 1998 restructuring that merged all of the companys communications operations into a new entity called the Communications Enterprise. Within this organization were created several customer-focused sectors, with the three main ones being: personal communications, which served the consumer market and included wireless phones, pagers, and some two-way radios; network solutions, which served telecommunications providers and concentrated on wireless-telephone infrastructure and satellite communications; and a commercial, government, and industrial solutions group which was created to design and build communications systems for large organizations.

Motorolas semiconductor and integrated circuit operations were also restructured in the late 1990s; these units were reorganized into two areas: the Semiconductor Products Sector, which adopted a concentration on embedded semiconductors, and the Integrated Electronic Systems Sector, which focused on embedded electronic systems for various industrial markets. Motorola began winding down its involvement in the general-purpose semiconductor sector, a process that culminated in 1999 with a management buyout, led by Texas Pacific Group, of the Semiconductor Components Group. As part of the transaction, Motorola received $1.6 billion in cash and a ten percent stake in the new company, renamed ON Semiconductor. Galvins restructuring efforts also included the launch in mid-1998 of a 12-month program of factory consolidation, divestments of under-performing units, and asset writedowns; as well as the elimination of 15,000 workers from the company payroll, a ten percent workforce reduction. Motorola took a $1.95 billion charge related to the restructuring, leading to a net loss for 1998 of $962 million; sales fell one percent from the previous year, to $29.4 billion, as a result of the divestments.

It appeared that 1999 might be considered a turnaround year for Motorola, as revenues surpassed the $30 billion mark for the first time, despite the divestment of the commodity semiconductor business; the company also returned to profitability. Motorola finally began selling substantial numbers of digital cellular telephones during the year, although sales were hampered by shortages of certain components. The company was also returning to the cutting edge through its attempt to develop a new technology to deliver voice, data, and video from the Internet to wireless devices. This endeavor was telling in that Motorola, an historically go-it-alone company, was partnering with Cisco Systems Inc. and Sun Microsystems Inc. In addition to forging alliances, Motorola was also working to shift from being strictly a maker of hardware to being a software designer as well. For example, the company was working to equip all of its cellular telephones with an Internet browser.

Motorola also turned to the acquisition route in 1999, in a very large way, with the announcement of a $17 billion stock swap for General Instrument Corporation, the leading maker of broadband set-top boxes. Completed in early 2000, this was the largest acquisition in Motorola history, and it gave the company a significant presence in the emerging broadband telecommunications sector. Broadband visionaries spoke of a dramatic convergence whereby all the main telecom servicestelephony, cable television, video, e-mail, high-speed Internet access, and interactive gamingwould be delivered to a television via a single set-top box. Following the completion of the acquisition, General Instalment became the new broadband communications sector within the Communications Enterprise. This new sector also included Motorolas existing cable modem operations. General Instrument also brought to Motorola its 67 percent stake in Next Level Communications, a supplier of the emerging digital subscriber line (DSL) technology. With DSL, basic copper telephone wires were able to be used for highspeed Internet access.

A dark cloud hanging over Motorola as the 21st century began was the Iridium satellite phone system, which began operation in late 1998 following $5 billion in development costs. Iridium immediately began having technological glitches and, even though it allowed its users to use their cellular phones anywhere on the planet, suffered from low demand because of its extremely high rates (e.g., $3 per minute calls). In August 1999 Iridium LLC, in which Motorola held an 18 percent stake, began operating under bankruptcy protection. Motorola subsequently took a $740 million charge related to Iridium in late 1999, leaving it with a $460 million cash exposure to the venture. In early 2000 Motorola also faced a possible $3.5 billion lawsuit from a group of Iridium bondholders. Despite these setbacks, Motorola was moving forward with another, even larger satellite venture, Teledesic L.L.C., in which it was the chief contractor and held a 26 percent stake. A $10 billion project, Teledesic aimed to create, by 2004, a low-orbit satellite system for the delivery of voice, data, and high-speed Internet access to handheld devices. Motorolas prominent involvement in the satellite and broadband ventures, however risky they might be, provided ample evidence that the company was back on the technological cutting edge.

Principal Subsidiaries

Motorola Argentina, S.A.; Motorola Gesellschaft M.B.H. (Austria); S.A. Motorola N.V. (Belgium); Motorola de Bolivia S.A.; Motorola do Brasil LTD A. (Brazil); Starfish Software, Inc.; Indala Corporation; Motorola Canada Limited; Motorola (China) Electronics Ltd.; Motorola de Colombia Limitada; Motorola International Capital Corporation; Motorola International Development Corporation; Motorola Credit Corporation; Motorola Lighting, Inc.; Motorola International Network Ventures; Motorola del Ecuador S.A.; Motorola Limited (U.K.); Motorola Semiconducteurs S.A. (France); Motorola S.A. (France); Motorola G.m.b.H. (Germany); Motorola A.E. (Greece); Motorola Finance B.V. (Netherlands); Motorola Asia Limited (Hong Kong); Motorola Semiconductors Hong Kong Limited; Motorola Hungary Communications Limited Liability Company; Motorola (India) Limited; Motorola Ireland Limited; TCS Insurance Company of Ireland Limited; Motorola Israel Limited; Motorola Semiconductor Israel Limited; Motorola Israel Information Systems Limited; Motorola S.p.A. (Italy); Motorola Japan Limited; Motorola Korea Limited; Motorola Malaysia Sdn. Bhd.; Motorola Semiconductor Sdn. Bhd. (Malaysia); Motorola Electronics Sdn. Bhd. (Malaysia); Motorola de Mexico, S.A.; North African Cellular Investments, Ltd. (Morocco); Motorola del Paraguay S.A.; Motorola Portugal Comunicacoes, Lda; Motorola Communications SRL (Romania); Motorola A.O. (Russia); Motorola Electronics Pte. Limited (Singapore); Motorola South Asia Pte Limited (Singapore); Motorola Asia Treasury Pte. Ltd (Singapore); Motorola Southern Africa (Proprietary) Ltd. (South Africa); Motorola España S.A. (Spain); Telcel S.A. (Spain); Motorola (Suisse) S.A. (Switzerland); Motorola Electronics Taiwan, Limited; Motorola (Thailand) Ltd.; Motorola Komunikasyson Ticaret Ve Servis Limited Sirketi (Turkey); Motorola de los Andes, C.A. (Venezuela); Motorola Foreign Sales Corporation (Virgin Islands).

Principal Operating Units

Semiconductor Products; Integrated Electronic Systems.

Principal Competitors

ADC Telecommunications, Inc.; Advanced Micro Devices, Inc.; Agilent Technologies, Inc.; Alcatel; Analog Devices, Inc.; Casio Computer Co., Ltd.; Cisco Systems, Inc.; Fujitsu Limited; General Electric Company; Harris Corporation; Hitachi, Ltd.; Hyundai Group; Intel Corporation; International Business Machines Corporation; ITT Industries, Inc.; Koninklijke Philips Electronics N.V.; Kyocera Corporation; LG Group; Lucent Technologies Inc.; Marconi pic; Matsushita Electric Industrial Co., Ltd.; Micron Technology, Inc.; Mitsubishi Group; National Semiconductor Corporation; NEC Corporation; Nokia Corporation; Nortel Networks Corporation; Oki Electric Industry Company, Limited; QUALCOMM Incorporated; Racal Electronics Pic; Robert Bosch GmbH; Samsung Group; Scientific-Atlanta, Inc.; Siemens AG; Sony Corporation; Telefonaktiebolaget LM Ericsson; Texas Instruments Incorporated; Thomson S.A.; 3Com Corporation; Toshiba Corporation.

Further Reading

Alster, Norm, A Third-Generation Galvin Moves Up, Forbes, April 30, 1990, pp. 57 +.

Barboza, David, Motorola Rolls Itself Over: After a Bad Year, Almost Everything Is Coming Up Rosy, and Wireless, New York Times, July 14, 1999, p. C1.

Bettner, Jill, Underpromise, Overperform,Forbes, January 30,1984, pp. 88 +.

Brown, Kathi, A Critical Connection: The Motorola Service Station Story, Rolling Meadows, 111.: Motorola University Press, 1992, 253 p.

Cauley, Leslie, Motorola Corp. Unveils Deal for $11 Billion, Wall Street Journal, September 16, 1999, p. BIO.

, Motorola Profit Meets Estimates, Despite Iridium Woes, Shortages, Wall Street Journal, January 18, 2000, p. B6.

Coy, Peter, and Ron Stodghill II, Is Motorola a Bit Too Patient?, Business Week, February 5, 1996, pp. 150-51.

Crockett, Roger O., Has Motorola Found Its Cable Guy?, Business Week, September 27, 1999, p. 50.

, Motorola Girds for a Shakeup, Business Week, April 13,1998,p. 33.

, Motorola: Slow and Steady Isnt Winning Any Races, Business Week, August 10, 1998, p. 62.

Crockett, Roger O., and Catherine Yang, Why Motorola Should Hang Up on Iridium, Business Week, August 30, 1999, p. 46.

Crockett, Roger O., and Peter Elstrom, How Motorola Lost Its Way, Business Week, May 4, 1998, pp. 140 +.

Dreyfack, Kenneth, Its Now or Never for Motorola Computers, Business Week, September 15, 1986, pp. 184J +.

Elstrom, Peter, Did Motorola Make the Wrong Call?, Business Week, July 29, 1996, p. 66.

Elstrom, Peter, Gail Edmondson, and Eric Schine, Does This Galvin Have the Right Stuff?, Business Week March 17,1997, pp. 102 +.

Feder, Barnaby J., Some Humbling Times for a High-Tech Giant, New York Times, October 13, 1996, sec. 3, p. 1.

Galarza, Pablo, Keep the Faith, Financial World, January 30, 1996, pp. 30-32.

Galvin, Robert W., The Idea of Ideas, Rolling Meadows, 111.: Motorola University Press, 1993.

Hardy, Quentin, Galvins Task: Make Motorola Scary Again, Wall Street Journal, March 7, 1997, p. B8.

, Higher Calling: How a Wifes Question Led Motorola to Chase Global Cell-Phone Plan, Wall Street Journal, December 16,1996, pp. Al +.

, Motorola Prepares Major Restructuring, Wall Street Journal, March 31, 1998, p. A3.

, Motorola Selects Christopher Galvin, Grandson of Firms Founder, as CEO, Wall Street Journal, November 15,1996, p. A3.

, Motorola Unveils a Major Reorganization, Wall Street Journal, July 10, 1998, p. B5.

, Next Leader in the Motorola Dynasty Faces Task of Reshaping Corporation, Wall Street Journal, November 18, 1996, p. BIO.

, Unsolid State: Motorola, Broadsided by the Digital Era, Struggles for a Footing, Wall Street Journal, April 22, 1998, pp. Al 4-.

Harris, Nicole, Motorola Sees Strong Growth This Year, Wall Street Journal, January 19, 2000, p. B6.

Henkoff, Ronald, Keeping Motorola on a Roll, Fortune, April 18, 1994, pp. 67-68 +.

, What Motorola Learns from Japan, Fortune, April 24, 1989, pp. 157 +.

Hill, G. Christian, and Don Clark, Motorola to Slash Staff, Take Big Charge, Wall Street Journal, June 5, 1998, p. A3.

McWilliams, Gary, Microprocessors Are for Wimps, Business Week, December 15, 1997, p. 134.

Motorolas New Strategy, Business Week, March 29, 1982, pp. 128 +.

Naik, Gautam, Motorola Still Is Struggling in Europe, Wall Street Journal, February 11, 2000, p. A12.

, Nokia Widens Lead in Wireless Market While Motorola, Ericsson Fall Back, Wall Street Journal, February 8, 2000, p. B8.

Petrakis, Harry Mark, The Founders Touch: The Life of Paul Galvin of Motorola, New York: McGraw-Hill, 1965; 3rd. ed., Chicago: Motorola University Press/J.G. Ferguson, 1991, 242 p.

Roth, Daniel, Burying Motorola: From Poster Boy to Whipping Boy, Fortune, July 6, 1998, pp. 28-29.

, Motorola Lives!, Fortune, September 27, 1999, pp. 305-6.

Schoenberger, Karl, Motorola Bets Big on China, Fortune, May 27,1996, pp. 116-18 +.

Schonfeld, Erick, Hold the Phone: Motorola Is Going Nowhere Fast, Fortune, March 30, 1998, p. 184.

Slutsker, Gary, The Company That Likes to Obsolete Itself, Forbes, September 13, 1993, pp. 139 +.

Tetzeli, Rick, And Now for Motorolas Next Trick, Fortune, April 28, 1997, pp. 122-24 +.

Therrien, Lois, Motorola Sends Its Work Force Back to School, Business Week, June 6, 1988, pp. 80 +.

, The Rage to Page Has Motorolas Mouth Watering, Business Week, August 30, 1993, pp. 72 +.

, The Rival Japan Respects, Business Week, November 13, 1989, pp. 108 +.

Thurm, Scott, Joann S. Lublin, and Leslie Seism, Galvin Must Show a Motorola Recovery Before Dismissal Pressure Grows Intense, Wall Street Journal, June 8, 1998, p. A3.

Upbin, Bruce, Motorola Inside, Forbes, May 31, 1999, pp. 51-52.

Upbin, Bruce, and Michael Ozanian, Analytic Myopia, Forbes, June 1, 1998, pp. 42-43.

Yee, David, Motorola: More Than Chips, Financial World, fall 1994, p. 14.

Zajac, Andrew, Technical Convergence at Heart of Motorola Merger, Chicago Tribune, September 15, 1999.

April Dougal Gasbarre

updated by David E. Salamie

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Motorola, Inc.

Motorola, Inc.

1303 East Algonquin Road
Schaumburg, Illinois 60196-1079
U.S.A.
(708) 576-5000

Public Company
Incorporated:
1928 as Galvin Manufacturing Corporation
Employees: 120,000
Sales: $16.96 billion
Stock Exchanges: New York Midwest London Tokyo

SICs: 3674 Semiconductors and Related Devices; 3663 Radio and TV Broadcasting and Communication Equipment; 3661 Telephone and Telegraph Apparatus; 3571 Electronic Computers; 3694 Electrical Equipment for Internal Combustion Engines; 3812 Search and Navigation Equipment; 3670 Electronic Components and Accessories.

Electronic communications pioneer Motorola, Inc. ranked among the 25 largest companies in the world in the early 1990s. At that time, the corporation sold 45 percent of the worlds cellular phones and an overwhelming 85 percent of its pagers. Motorola also commanded a very respectable third-place showing among the worlds manufacturers of semiconductors. Over half of its sales were made outside the United States. Motorola also gained recognition over the years for its emphasis on quality, for which it garnered the first annual Malcolm Baldrige National Quality Award in 1988, and for its innovative employee welfare and training programs.

The story of Motorola was an American classic. It began during the 1920s, when a small-town Illinois boy, Paul Galvin, went to Chicago to seek his fortune. Galvin had returned from World War I with an interest in the technological changes of the time. In 1920 he worked for a Chicago storage-battery company, and one year later he opened his own storage-battery company with a hometown friend, Edward Stewart. After two years of rocky operations, the government closed the business for non-payment of excise taxes.

The former partners, undaunted by this setback, joined forces again three years later when Galvin bought an interest in Stewarts new storage-battery company. But with the rise of electric power, batteries lost popularity with the public. To keep their business afloat, Stewart created a device that allowed a radio to be plugged into an ordinary wall outlet, aptly named the battery eliminator. Once again, the storage-battery company failed, though Galvin was able to buy back the eliminators at the companys public auction. Joe Galvin joined his brother Paul at this time to peddle the eliminators to various retail distributors, such as Sears, Roebuck and Company. In 1928 Paul formed the Galvin Manufacturing Corporation with five employees and $565, and continued making battery eliminators.

During the Great Depression, Galvin Manufacturing Corporation found itself burdened by inventory that it could not sell because of restricted market conditions and underselling by other manufacturers. To rectify this situation, Galvin began experimenting with the virtually untouched automobile-radio market. Before this time, automobile radios had been deemed impractical because they had very poor reception. The first commercially successful car radio came out of Galvin Manufacturing in 1930 under the brand name Motorola. The name, coined by Galvin, was a hybrid of motor and victrola. The units sold for about $120 including accessories and installation, which compared favorably with the $200-$300 custom-designed units then available.

During the 1930s the company also established its first chain of distributorships (Authorized Motorola Installation Stations), began advertising its products in newspapers and on highway billboards, and started to research radios to receive only police broadcasts. The market for police radios appeared so promising that the company formed a police radio department. In 1937 Galvin Manufacturing entered the home-radio market, introducing the first push-button tuning features.

In 1936, after a tour of Europe with his family, Galvin returned home convinced that war was imminent. Knowing that war could provide new opportunities, he directed the companys research into areas he felt could be useful to the military. The Handie-Talkie two-way radio and its offspring, the Walkie-Talkie, resulted. Used by the United States Army Signal Corps, these were among the most important pieces of communications equipment used in World War II.

Galvin was always concerned with the welfare of his employees, and in 1947 he instituted a very liberal profit-sharing program that was used as a model by other companies. By this time, the company employed around 5,000 people and had formed an early human-relations department. The companys good labor relations enabled it to remain nonunion throughout its history. After Galvins son Robert and Daniel Noble, an engineer who would eventually have a tremendous impact on the future of the company, joined the company in 1947, its name was officially changed to Motorola.

The first Motorola television was introduced that same year. It was more compact and less expensive than any competing modelsMotorola charged $180, while its nearest competitor charged more than $300. The Motorola Golden View set became so popular that within months of its introduction the company was the fourth-largest seller of televisions in the nation.

Later in 1947, Motorola bought Detrola, a failing automobile-radio company that had manufactured car radios for the Ford Motor Company. The purchase was made on the condition that Motorola retain Detrolas contract with Ford. This deal greatly strengthened the companys automobile-radio business. Motorola subsequently supplied 50 percent of the car radios for Ford and Chrysler as well as all of the radios for American Motors.

The creation of the transistor in 1948 by Bell Laboratories marked a major turning point for Motorola. The company had concentrated on the manufacture of consumer products, and Paul Galvin felt that the company was unequipped to enter the transistor and diode field. However, with his son Robert and Dan Noble advocating the companys expansion into this new market, a semiconductor-development group was formed. The first Motorola product to result from this effort was a three-amp power transistor, and later a semiconductor plant was constructed in Arizona. Following this expansion, Motorola supplied transistors to other companies for use in products that Motorola also manufactured. In effect, Motorola found itself in the awkward position of supplying its competitors with parts.

During the 1950s, Motorola became involved in the Columbia Broadcasting Systems failed entry into the color-television industry. Motorola used the CBS-designed and produced color tubes in its color-television sets. After a convoluted struggle for approval from the Federal Communications Commission (FCC), the CBS system was rejected in favor of a system developed by the Radio Corporation of America (RCA). Despite this setback, Motorola pioneered many new features in television technology, including a technique for reducing the number of tubes in black-and-white sets from 41 to 19.

By the middle of the decade, Paul Galvin realized that the company had become too large for one man to continue making all the decisions. He granted divisional status to various businesses, giving each its own engineering, purchasing, manufacturing, and marketing departments and regarding each as an individual profit center. This was the beginning of Motorolas famous decentralized-management scheme. As part of this reorganization, Robert Galvin became president and each divisional manager an executive vice-president. Paul Galvin became chairman of the board and CEO, which he remained until his death in 1959. Beginning in 1958, Motorola became involved in the American space program. Virtually every manned and unmanned space flight since that time utilized some piece of Motorola equipment.

Motorola made several acquisitions during the 1960s that left observers baffled. It purchased, and sold almost immediately, Lear Inc.s Lear Cal Division, which manufactured aircraft radios. This was followed by the purchase and subsequent divestment of the Dalberg Company, a manufacturer of hearing aids. Acquisitions were also considered in the fields of recreation, chemicals, broadcasting, and even funeral homes. This trend continued into the 1970s and constituted a period of real adjustment for Motorola. However, three very important corporate strategies grew out of this floundering.

First, the company began to expand operations outside the United States, building a plant in Mexico and marketing Motorola products in eight countries, including Japan. An office in Japan was opened in 1961, and in 1968 Motorola Semiconductors Japan was formed to design, market, and sell integrated circuits. Second, Robert Galvin instituted several progressive management policies. In 1974, the company launched an employee training and involvement program that emphasized teamwork and empowered workers at all levels to make decisions. Such policies laid the groundwork for Motorolas much-touted quality and efficiency gains of the 1980s. Third, in the late 1970s, Motorola gradually began to discontinue its consumer-product lines in favor of high-tech electronic components.

Motorolas radio and television interests were the first to go. In 1974 Motorola sold its consumer products division, which included Quasar television, to the Matsushita Electric Industrial Company of Japan. Three years later the company acquired Codex Corporation, a data-communications company based in Massachusetts. In 1978 Universal Data Systems was added. Motorola began phasing out its car-radio business at the end of the decade, and made its last car radio in 1983. These maneuvers were intended to concentrate Motorolas activities in high technology.

Motorolas largest and most important acquisition came in 1982 with its purchase of Four-Phase Systems, Inc. for $253 million. A California-based manufacturer of computers and terminals, Four-Phase also wrote software for its own machines. The purchase puzzled observers because Four-Phase was in serious trouble at the time. Though Four-Phase did quite well in the 1970s, by the end of that decade its product line was aging, its computer-leasing base had grown too large, and its debt was tied to the rising prime rate. These problems had their origin in the companys insistence upon manufacturing its own semiconductors instead of purchasing commercially available componentsan insistence that consumed time and money, and also meant that new product developments at Four-Phase were slow in coming. However, Motorola was looking for a custom-computer manufacturer and was impressed with the sales force at Four-Phase: Motorolas grand strategy was to branch into the new fields of office automation and distributed data processing.

Distributed data processing involved the processing of data through computers that were geographically distributed. The purchases of both Four-Phase and Codex made perfect sense when viewed in light of Motorolas intent to enter this field. The plan was simple: data processing provided by Four-Phase computers would be linked by data-communications equipment provided by Codex, and Motorola proper would provide the semiconductors and much of the communications equipment for the operation. The goal was to create a fully mobile data-processing system that would allow access to mainframe computers from a pocket unit. Motorola also figured that its experience in portable two-way radios and cellular remote telephone systems would prove valuable in this endeavor. Although Motorola was able to turn Four-Phrase around temporarily, Four-Phrase lost more than $200 million between 1985 and 1989.

The cellular remote telephone system was developed by American Telephone and Telegraphs Bell Laboratories in the early 1970s. The system functioned by dividing an area into units, or cells, each with a low-level transmitter that had 666 channels. As a driver using a phone moved from cell to cell, his call was carried on the transmitter in each successive cell. After he left a cell, the channel he was using became available for another call in that cell. (Earlier remote systems relied on a powerful transmitter covering a large area, which meant that only a few channels were available for the whole area.) Motorola aided in the design and testing of the phones and supplied much of the transmission-switching equipment.

Motorolas early estimates of the cellular phone market seemed astronomicalone million users by the early 1990sthough in fact there were more than 4 million users by 1989. However, the system developed major problems. There were massive licensing and construction problems and delays. Added to this were complaints about the quality and reliability of Motorolas phones compared to Japanese-manufactured remote phones. A surplus of phones, coupled with the desire to capture a large market share, soon prompted Japanese companies to cut their prices radicallysome by as much as half. Motorola went straight to the U.S. government to request sanctions against the Japanese companies. In 1986 the commerce department declared that eight Japanese companies were in fact dumping their products (selling at a below-cost price) and were liable to pay special duties. This gave Motorola a new edge in the cellular-phone marketit soon became the worlds top supplier of cellular phones, though the competition remained intense.

Motorolas relations with Japanese companies has been checkered. In 1980 it formed a joint venture with Aizu-Toko K. K. to manufacture integrated circuits in Japan. Two years later Motorola acquired the remaining 50 percent interest in the company from Aizu-Toko and created Nippon Motorola Manufacturing Company, a successful operation run along Japanese lines mostly by Japanese. Also in 1982, Motorola received a $9 million order for paging devices from Nippon Telegraph and Telephone. These ventures were followed by vigorous pleas from Robert Galvin for the U.S. government to respond in kind to Japans trade tactics. In fact, Galvin was a founder of the Coalition for International Trade Equity. This organization has lobbied Congress for legislation that would impose tariffs on foreign companies that are subsidized by their governments. Motorola further called for a surcharge on all imports to reduce the U.S. trade deficit. Other major companies in the United States (Boeing and Exxon among them) have rejected these measures on the grounds that they would spark trade wars that would damage the position of U.S. companies doing business with Japan.

In 1986, Motorola made a groundbreaking deal with Japans Toshiba to share its microprocessor designs in return for Toshibas expertise in manufacturing dynamic random access memories (DRAMs). Prior to this arrangement, the Japanese had driven Motorola, along with nearly every other American semiconductor company, out of the DRAM market.

In 1988, Motorola took on the Japanese in another way: that year its Boynton Beach, Florida, plant began producing the companys Bravo model pocket pager in a fully automated factory. The prototypical facility used 27 small robots directed by computers and overseen by 12 human attendants. The robots could build a Bravo within two hours of the time an order was received at corporate headquarters in Schaumburg, Illinois; the process normally would take three weeks.

Motorolas adoption of Total Quality Management (TQM) principles during the 1980s furthered that push for quality and earned it the admiration of analysts and competitors alike.

Building on the foundation laid by his employee empowerment programs of the 1970s, Robert Galvin was able to instill a drive for continuous quality improvement in his teams of workers. From 1981 to 1986, Motorola reduced its defect rate by 90 percent. By 1992, the company had achieved six sigma quality: less than 3.4 mistakes per million. The corporation did not sacrifice productivity for these quality improvements, either: from 1986 to 1994, sales per employee increased 126 percent, in spite of a net increase in the work force. Some divisions had achieved such high quality rates that they were striving to reduce error rates to defects per billion in the 1990s. The corporations ongoing goals were to reduce error rates tenfold every two years and simultaneously reduce production time tenfold every five years. Motorolas campaign for quality was highlighted by its 1988 receipt of the first annual Malcolm Baldrige National Quality Award.

In 1989 Motorola introduced the worlds smallest portable telephone, but soon found that its new product was excluded from the Tokyo and Nagoya markets, two cities that together represented more than 60 percent of the $750 million Japanese cellular phone market. When Motorola cried foul, the Japanese government agreed to allow adapted Motorola phones in Tokyo, but only for use in automobiles. This excluded the 90 percent of portable phones used on trains. In response to these restrictions, Motorola led the push to impose trade sanctions on certain Japanese imports. Then-President George Bush publicly accused Japan of being an unfair trading partner and threatened to take punitive action if the Japanese did not remove barriers to free trade.

The growth of the computer industry has provided both opportunities and challenges for Motorola. Throughout the 1980s, the companys most popular 68000 family of microchips powered personal computers (PCs) and workstations built by Apple Computer, Inc., Hewlett-Packard Company, Digital Equipment Corporation, and Sun Microsystems, Inc., among others. Upstart competitor Intel Corporation, whose chips were the cornerstone of International Business Machines Corporation (IBM) and IBM-compatible PCs, launched a successful campaign to capture the microchip market. Intel combined ever-increasing power and speed with aggressive marketing to win the semiconductor market from Motorola. Undaunted, Motorola teamed up with industry giants Apple and IBM to develop the PowerPC in the 1990s. As of 1993, Motorola ranked third among the worlds semiconductor manufacturers, behind Intel and Japans NEC Corp.

In many respects, however, Motorolas computer chip operations have been eclipsed by its communications interests. The companys 45 percent leading share of the global cellular phone market and whopping 85 percent of the worlds pager sales forced it to place an increased emphasis on consumer marketing in the early 1990s. Accordingly, Motorola recruited market specialists from General Electric, Black and Decker, Apple, and (as Fortune put it in a 1994 article) even Mattel. The company began selling its pagers at mass merchandisers and offering them in a variety of colors. Evidence of its re-entry into the consumer market after nearly twenty years came in the form of a 1993 television and print campaign targeted at women (especially mothers).

Over the course of the 1980s, Motorolas sales and profits tripled, to $9.6 billion and $498 million, respectively, in 1989. By 1993, sales vaulted over 56 percent to $16.96 billion and earnings more than doubled to over $1 billion. The company underwent its third transfer of power that year, when Robert Galvin retired to the office of chairman of the executive committee of the board at the age of 71. Gary L. Tooker, former president and chief operating officer, advanced to the chair and chief executive office, and Galvins son Christopher assumed Tookers responsibilities.

Although some analysts worried that Motorola, like many other large, successful corporations, would fall into complacency, that fear did not seem well founded. The company has earned a reputation for self-obsolescence that seemed likely to keep it in the vanguard of wireless communication. For example, the Motorola Integrated Radio Service (MIRS) combined features of cellular phones, pagers, and two-way radios in a system that could rival all three. Motorola hoped to undermine the cellular duopolies organized by the Federal Communications Commission by operating the system over Specialized Mobile Radio (SMR) frequencies that had been limited to use by taxis and tow trucks. Motorola also continued work on its multi-billion dollar Iridium project, a plan to wirelessly interconnect the entire globe through a system of low-earth-orbiting satellites (LEOS). The company hoped to complete the project by 1998.

Continuing globalization at Motorola focused on Asian, Eastern European, and Latin American markets in the early 1990s. In 1993, the company announced Corporate Americas biggest manufacturing venture in China: two plants for the manufacture of simple integrated circuits, pagers, and cellular phones. Motorola executives expected foreign revenues to constitute 75 percent of annual sales by the turn of the century, up from 56 percent in 1993.

Principal Subsidiaries

Codex Corporation; Motorola Credit Corporation; Motorola International Capital Corporation; Motorola International Development Corporation; Universal Data Systems; Motorola Australia Proprietary Ltd.; Motorola (China) Electronics Ltd.; Iridium, Inc.; Motorola International Sales, Inc.; Motorola Lighting, Inc.; Motorola Satellite Communications, Inc.; Motorola Telcarro de Puerto Rico, Inc.; Motorola A.S.; Motorola Electronique Automobile; Motorola S.A. (France); Motorola Electronic GmbH (Germany); Motorola B.V. (The Netherlands); Motorola Communications Israel Ltd.; Motorola Telephone Cellular Communication Ltd.; Motorola SpA (Italy); Nippon Motorola, Ltd. (Japan); Motorola Electronics Sdn. Bhd. (Malaysia); Embarc Communication Services, Inc.; Motorola Philippines, Inc.; Motorola España S.A.; Motorola A.B. (Sweden); Telcel S.A.; Motorola Foreign Sales Corp.; Motorola Componentes de Puerto Rico, Inc.; Motorola Portavoz de Puerto Rico, Inc.; Motorola Telcarro de Puerto Rico, Inc.; Motorola Canada Ltd.; Motorola Limited (United Kingdom); Motorola Semiconducteurs S.A. (France); Motorola GmbH (Germany); Motorola Asia Ltd. (Hong Kong); Motorola Semiconductors Hong Kong Ltd.; Motorola Israel Limited; Motorola Korea, Ltd.; Motorola Malaysia Sdn. Bhd.; Motorola Semiconductor Sdn. Bhd. (Malaysia); Motorola de Mexico, S.A.; Motorola Electronics Pte. Ltd. (Singapore); Motorola Electronics Taiwan, Ltd.

Further Reading

Brown, Kathi, A Critical Connection: The Motorola Service Station Story, Rolling Meadows, Illinois: Motorola University Press, 1992.

Galvin, Robert W., The Idea of Ideas, Rolling Meadows, Illinois: Motorola University Press, 1993.

Henkoff, Ronald, Keeping Motorola on a Roll, Fortune, April 18, 1994, pp. 67-78.

Petrakis, Harry M., A Founders Touch: The Life of Paul Galvin of Motorola, New York, McGraw-Hill, 1965.

updated by April Dougal Gasbarre

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Motorola, Inc.

Motorola, Inc.

1303 East Algonquin Road
Schaumburg, Illinois 60196
U.S.A.
(708) 397-5000

Public Company
Incorporated: 1928 as Galvin Manufacturing Corporation
Employees: 102,000
Sales: $8.25 billion
Stock Index: New York Midwest London Tokyo

Motorolas story is an American classic. It begins during the 1920s, when a small-town Illinois boy, Paul Galvin, went to Chicago to seek his fortune. His story continues today in a multi-billion dollar corporation with operations throughout the world.

Paul Galvin returned from World War I with an interest in the technological changes of the time. In 1920 he worked for a Chicago storage-battery company, and one year later he opened his own storage-battery company with a hometown friend, Edward Stewart. After two years of rocky operations, the government closed the business for non-payment of excise taxes. The former partners, undaunted by this setback, joined forces again three years later when Galvin bought an interest in Stewarts new storage-battery company. But with the rise of electric power, batteries lost popularity with the public. To keep their business afloat, Stewart created a device that allowed a radio to be plugged into an ordinary wall outlet, aptly named the battery eliminator. Once again, the storage-battery company failed, though Galvin was able to buy back the eliminators at the companys public auction. Joe Galvin joined his brother Paul this time to peddle the eliminators to various retail distributors like Sears, Roebuck and Company. In 1928 Paul formed the Galvin Manufacturing Corporation, with five employees and $565, and continued making battery eliminators.

During the Great Depression Galvin Manufacturing Corporation found itself burdened by inventory that it couldnt sell because of restricted market conditions and underselling by other manufacturers. To rectify this situation, Galvin began experimenting with the virtually-untouched automobile-radio market. Before this, automobile radios had been deemed impractical because they had very poor reception. The first commercially successful car radio came out of Galvin Manufacturing in 1930 under the brand name Motorola. The name, coined by Galvin, is a hybrid of motor and victrola. The units sold for about $120 including accessories and installation, which compared favorably with the $200-$300 custom-designed units then available.

During the 1930s the company also established its first chain of distributorships (Authorized Motorola Installation Stations), began advertising its products in newspapers and on highway billboards, and started to research radios to receive only police broadcasts. The market for police radios appeared so promising that the company formed a police radio department. In 1937 Galvin Manufacturing entered the home-radio market, introducing push-button tuning at that time.

In 1936 Paul Galvin returned from a tour of Europe with his family, convinced that war was imminent. Knowing that war could provide new opportunities, he directed research into ways his company could be useful to the military. The Handie-Talkie two-way radio and its off-spring, the Walkie-Talkie, resulted. Used by the United States Army Signal Corps, these were among the most important pieces of communications equipment used in World War II.

Paul Galvin was always concerned with the welfare of his employees and in 1947 he instituted a very liberal profit-sharing program that was used as a model by other companies. By this time, the company was employing around 5,000 people and had formed a human-relations department. Galvins son Robert and Daniel Noble, an engineer who would eventually have a tremendous impact on the future of the company, joined Galvin, and in 1947 the company officially changed its name to Motorola.

The first Motorola television was also introduced that same year. It was more compact and less expensive than any of the competitors modelsMotorola charged $180, while its nearest competitor charged more than $300. The Motorola set became so popular that within months of its introduction the company was the fourth-largest seller in the nation.

Later in 1947, Motorola bought Detrola, a failing automobile-radio company that had manufactured car radios for the Ford Motor Company. The purchase was made on the condition that Motorola retain Detrolas contract with Ford. This deal greatly strengthened the companys automobile-radio business. Motorola subsequently supplied 50% of the car radios for Ford and Chrysler as well as all of the radios for American Motors.

The creation of the transistor in 1948 by Bell Laboratories marked a major turning point for Motorola. The company had concentrated on the manufacture of consumer products, and Paul Galvin felt that the company was unequipped to enter the transistor and diode field. However, with his son Robert and Dan Noble advocating the companys expansion into this new market, a semiconductor-development group was formed. The first Motorola product to come out was a three-amp power transistor and later a semiconductor plant was constructed in Arizona. As a result of this expansion Motorola supplied transistors to other companies for use in products that Motorola also manufactured. In effect, Motorola found itself in the awkward position of supplying its competitors with parts.

During the 1950s, Motorola was involved in the Columbia Broadcasting Systems failed entry into the color-television industry. Motorola used the CBS designed and produced color tubes in its color-television sets. After a convoluted struggle for approval from the Federal Communications Commission (FCC), the FCC rejected the CBS system in favor of a system developed by the Radio Corporation of America (RCA). Despite this setback, Motorola pioneered new features in television technology, including a technique for reducing the number of tubes in black-and-white sets from 41 to 19.

By the middle of the decade, Paul Galvin realized that the company had become too large for one man to continue making all the decisions. He granted divisional status to various businesses, giving each its own engineering, purchasing, manufacturing, and marketing departments and regarding each as an individual profit center. This was the beginning of Motorolas famous decentralized-management scheme. As part of this reorganization, Robert Galvin became president and each divisional manager an executive vice-president. Paul Galvin became chairman of the board and CEO, which he remained until his death in 1959.

Beginning in 1958, Motorola became involved in the space program. Virtually every manned and unmanned space flight since that time has been equipped with some piece of Motorola equipment.

Motorola made several acquisitions during the 1960s that left observers baffled. It purchased, and sold almost immediately, Lear Inc.s Lear Cal Division, which manufactured aircraft radios. This was followed by the purchase and subsequent divestment of the Dalberg Company, a manufacturer of hearing aids. Acquisitions were also considered in the fields of recreation, chemicals, broadcasting, and even funeral homes. This trend continued into the 1970s and constituted a period of real adjustment for Motorola. However, two very important corporate strategies grew out of this floudering.

First, the company began to expand operations outside the United States, building a plant in Mexico and marketing Motorola products in eight countries, including Japan. An office in Japan was opened in 1961, and in 1968 Motorola Semiconductors Japan was formed to design, market, and sell integrated circuits. Second, toward the end of the decade, Motorola gradually began to discontinue its consumer products, a watershed in the companys history.

Motorolas radio and television interests were the first to be disposed of. In 1974 Motorola sold its consumer products division, which included Quasar television to the Matsushita Electric Industrial Company of Japan. Three years later the company acquired Codex Corporation, a data-communications company based in Massachusetts. In 1978 Universal Data Systems was added. At the end of the 1970s Motorola began phasing out its car-radio business. These maneuvers were intended to concentrate Motorolas activities in high technology.

Motorolas largest and most important acquisition came in 1982 with its purchase of Four-Phase Systems, Inc. for $253 million. A California-based manufacturer of computers and terminals, Four-Phase also wrote software for its own machines. The purchase puzzled observers because Four-Phase was in serious trouble at the time. Though Four-Phase did quite well in the 1970s, by the end of that decade its product line was aging, its computer-leasing base had grown too large, and its debt was tied to the rising prime rate. These problems had their origin in the companys insistence upon manufacturing its own semiconductors instead of purchasing commercially available componentsan insistence that consumed time and money, and also meant that new product developments at Four-Phase were slow in coming. However, Motorola was looking for a custom-computer manufacturer and was impressed with the sales force at Four-Phase: Motorolas grand strategy was to branch into the new fields of office automation and distributed data processing.

Distributed data processing involves the processing of data through computers that are geographically distributed. The purchases of both Four-Phase and Codex made perfect sense when viewed in light of Motorolas intent to enter this field. The plan was simple: data processing provided by Four-Phase computers would be linked by data-communications equipment provided by Codex, and Motorola proper would provide the semiconductors and much of the communications equipment for the operation. The goal was to create a fully mobile data-processing system that would allow access to mainframe computers from a pocket unit. Motorola also figured that its experience in portable two-way radios and cellular remote telephone systems would prove valuable in this endeavor. Although Motorola was able to turn Four-Phrase around temporarily, Four-Phrase lost more than $200 million between 1985 and 1989.

The cellular remote telephone system was developed by AT&Ts Bell Laboratories in the early 1970s. The system functions by dividing an area into units, or cells, each with a low-level transmitter that has 666 channels. As a driver using a phone moves from cell to cell, his call is carried on the transmitter in each successive cell. After he has left a cell, the channel he was using becomes available for another call in that cell. (Earlier remote systems relied on a powerful transmitter covering a large area, which meant that only a few channels were available for the whole area.) Motorola aided in the design and testing of the phones and supplied much of the transmission-switching equipment. Motorolas early estimates of the cellular phone market seemed astronomicalone million users by the early 1990s (in fact, there were more than 4 million users in 1989). However, the system developed major problems. There were massive licensing and construction problems and delays. Added to this were complaints about the quality and reliability of Motorolas phones compared to Japanese-manufactured remote phones. A surplus of phones, coupled with the desire to capture a large market share, soon prompted Japanese companies to cut their prices radicallysome by as much as half. Motorola went straight to the United States government to request sanctions against the Japanese companies. In 1986 the commerce department declared that eight Japanese companies were in fact dumping (selling at a below-cost price) and were liable to special duties. This has given Motorola a new edge in the cellular-phone marketit is now the worlds top supplier of cellular phonesthough the competition remains instense.

Motorolas relations with Japanese companies has been checkered. In 1980 it formed a joint venture with Aizu-Toko K. K. to manufacture integrated circuits in Japan. Two years later Motorola acquired the remaining 50% interest in the company from Aizu-Toko and created Nippon Motorola Manufacturing Company, a successful operation run along Japanese lines mostly by Japanese.

Also in 1982, Motorola received a $9 million order for paging devices from Nippon Telegraph & Telephone. These ventures were followed by vigorous pleas from Robert Galvin for the U.S. government to respond in kind to Japans trade tactics. In fact, Galvin is a founder of the Coalition for International Trade Equity. This organization has lobbied Congress for legislation that would impose tariffs on foreign companies that are subsidized by their governments. Motorola further called for a surcharge on all imports to reduce the U.S. trade deficit. Other major companies in the United States (Boeing and Exxon among them) have rejected these measures on the grounds that they would spark trade wars that would damage the position of U.S. companies doing business with Japan.

In 1986, Motorola made a groundbreaking deal with Japans Toshiba to share its microprocessor designs in return for Toshibas expertise in manufacturing DRAMs, or dynamic random access memories, a market the Japanese had driven Motorola, along with nearly every other American semiconductor company, out of with its dumping practices.

In 1988, Motorola took on the Japanese in another way: that year its Boynton Beach, Florida plant began producing the companys Bravo model pocket pager in a fully automated factory. The prototypical facility used 27 small robots directed by computers and overseen by 12 human attendants. The robots can build a Bravo within two hours of the time an order is received at corporate headquarters in Schaumburg, Illinois; the process normally would take three weeks. Through this and other corporate measures focusing on improving quality, Motorola hopes to reduce manufacturing errors to three mistakes per million operations by 1992.

In 1989 Motorola introduced the worlds smallest portable telephone, but soon found that its new product was excluded from the Tokyo and Nagoya markets, two cities that together represent more than 60% of the $750 million Japanese cellular phone market. When Motorola cried foul, the Japanese government agreed to allow adapted Motorola phones in Tokyo, but only for use in automobiles. This excluded the 90% of portable phones used on trains. In response to these tactics, Motorola led the push to impose trade sanctions on certain Japanese imports. President George Bush publicly accused Japan of being an unfair trading partner and threatened to take punitive action if the Japanese did not remove barriers to free trade.

The growth of the computer industry has provided new opportunities for Motorola. Throughout the 1980s, the companys most popular 68000 family of microchips powered PCs and workstations built by Apple, Hewlett Packard, Digital Equipment, and Sun Microsystems, among others. Motorola battled Intel, whose chips were the cornerstone of IBM and IBM-compatible PCs, for dominance in the microchip market. In 1988, Motorola unveiled its 88000 microchip series, which through the use of reduced instruction-set computing (RISC) computes twice as fast as Motorolas top-of-the-line conventional chips. But Motorola faces stiff competition in this market, especially from Intel, which introduced an even more powerful chip just after the 88000 series came out.

Motorola is currently divided into six operating units: the Communications Sector, the Semiconductor Products Sector, the General Systems Group, the Information Systems Group, the Automotive and Industrial Electronics Group, and the Government Electronics Group. Aerospace and defense contracts with the government account for about 10% of Motorolas sales and revenues. The automotive group manufactures ignition systems, engine-management controls, and instrumentation.

Future developments at Motorola will include further exploration of robotics, instrumentation, and CAD/CAM (computer-aided design and computer-aided manufacturing). The company hopes its annual sales will top $15 billion in the early 1990s. The steps it has taken during the last decade to provide itself with a related yet diversified group of products and Motorolas campaign for quality, highlighted by its receipt in 1988 of the first annual Malcolm Baldrige National Quality Award, should help it achieve that goal.

Principal Subsidiaries:

Codex Corporation; Motorola Credit Corporation; Motorola International Capital Corporation; Motorola International Development Corporation; Universal Data Systems; Motorola Componentes de Puerto Rico, Inc.; Motorola Portatiles de Puerto Rico, Inc.; Motorola Portavoz de Puerto Rico, Inc.; Motorola Telcarro de Puerto Rico, Inc.; Motorola Canada Ltd.; Motorola Data International, Inc. (Canada); Storno, S.A. (Denmark); Motorola Limited (U.K.); Motorola Semiconducteurs S.A. (France); Motorola GmbH (West Germany); Motorola Asia Ltd. (Hong Kong); Motorola Semiconductors Hong Kong Ltd.; Motorola Israel Limited; Motorola Korea, Ltd.; Motorola Malaysia Sdn. Bhd.; Motorola Semiconductor Sdn. Bhd. (Malaysia); Motorola de Mexico, S.A.; Motorola Electronics Pte. Ltd. (Singapore); Motorola Electronics Taiwan, Ltd.

Further Reading:

Petrakis, Harry M. A Founders Touch: The Life of Paul Galvin of Motorola, New York, McGraw-Hill, 1965.

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Motorola

Motorola A US corporation originally devoted to the production of car radios and now specializing in mobile communications and entertainment and. In the late 1950s it entered the semiconductor field and developed the 6800 and 68000 series of processors. These are generally regarded as a better design than the equivalent Intel processor chips and are widely used in embedded systems of all kinds. Motorola continues to be a major player in the field of mobile communications and related applications such as global positioning systems.

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