Motorola, Inc

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MOTOROLA, INC.

Motorola Inc. is known for its pioneering efforts in the car radio, pager, and cellular phone industries. With sales of $37.5 billion, it is the world's second largest manufacturer of mobile phones which, along with pagers and other communications devices, bring in nearly 33 percent of revenues. Semiconductors account for another 20 percent in sales. In the late 1990s, the Schaumburg, Illinois-based firm began laying off employees in an attempt to improve its bottom line. Various cost cutting measures continued into 2001, when Motorola closed its largest U.S. cellular phone factory and eliminated 2,500 positions.

EARLY HISTORY

The foundation for Motorola was laid when Illinois residents Paul V. Galvin and Edward Stewart founded a storage battery company in 1921. Although the U.S. government shut the new business down in 1923 for failure to pay excise taxes, operations continued when Stewart opened a new storage battery firm, named Stewart Storage Battery Co., in 1926. When the growing popularity of electric power undercut battery sales, Steward devised the "battery eliminator," a converter that allowed a battery-operated radio to plug into a wall outlet. The new product wasn't enough to keep the firm from insolvency; however, Galvin and his brother acquired the battery eliminator operations from the bankrupt firm, and they later incorporated the business as Galvin Manufacturing Corp.

Galvin began working on a new car radio receiver in 1929. The following year, the firm introduced the world's first commercially viable car radio. The product was named Motorola, a combination of the words of "motor" and "victrola." Motorola continued to lead the U.S. automobile radio industry into the 1930s. After a trip to Europe in 1936, Galvin recognized the likelihood of war and began preparing his firm for such an event. For example, he oversaw the development of the "Police Cruiser," a radio designed to receive police broadcasts. The firm diversified into home radios in 1937; at that time, more than half of all American households owned radios. B. F. Goodrich Co. became the first national Motorola dealer that year.

Galvin Manufacturing launched its first major advertising campaign, which included print ads, billboards, and road signs, in 1938. Two years later, the company created a hand-held, two-way radio, known as the "handie-talkie," for the U.S. military. Believing that radio communication products would be increasingly called upon to enhance military efforts, Galvin created a separate communications products division. Sales that year reached nearly $10 million.

In 1941, the company established Motorola Communications and Electronics, Inc. as its sales subsidiary. The first two-way FM radio communications products, which offered increased range and quieter operation, were introduced. Galvin Manufacturing completed its initial public offering in 1943, selling its share for $8.50 each. That year, Researcher Dan Noble developed the first portable two-way FM radio, known as the "walkie-talkie." Both the "walkie-talkie" and the "handie-talkie" played an integral role in U.S. military field communications during World War II. When the war ended, the firm renewed its development of electronic products for consumers.

Galvin Manufacturing officially adopted the Motorola name in 1947. The firm also purchased Detrola, a supplier of car radios to Ford Motor Co. Other major car radio clients included Chrysler and General Motors. Motorola diversified into televisions in 1948 with the launch of the Golden View VT71. Priced at $179, more than 100,000 unit were sold by the end of the year. As a result, Motorola became the fourth-largest television manufacturer in the nation. In 1949, the company established a research and development facility, headed by Dan Noble, in Phoenix, Arizona. By focusing on transistors, Noble played a major role Motorola's emergence as a leader in the worldwide semiconductor industry. Motorola also released a two-way FM radio communications equipment line which made us of the increased number of radio frequencies.

Developments during the early 1950s included a three-amp power transistor and a color television set, which proved problematic. The set was criticized for technical glitches and its high price. Limited color programming from broadcasters also posed a problem at the time. In 1956, the firm pulled its color television from shelves. A small car radio was the first commercial Motorola product to use transistors. The firm also unveiled a small radio receiver, called a pager, which was used mainly by hospitals. The first fully transistorized two-way radio was shipped in 1959; it became one of the firm's best selling products. Motorola unveiled its first portable transistor radio at roughly the same time. Competition heated up as several foreign radio manufacturers begin gaining market share.

INTERNATIONAL EXPANSION AND DIVERSIFICATION

Sales reached $300 million by 1960. International expansion efforts were initiated in 1961 with the establishment of an office in Japan. The firm's auto products division began producing alternators, a move which marked the beginning of Motorola's role as an auto industry electronics supplier. National Video and Motorola worked together in the mid-1960s to create the first rectangular picture tube for color televisions, a product that eventually became a standard in the color television industry. During the same period, Ford, RCA, and Motorola jointly developed the first eight-track tape player for automobiles. The falling cost of semiconductors fueled their increased use in consumer electronic products; to take advantage of the growing market, Motorola developed a line of low-cost, plastic encapsulated transistors. Other new product releases included a line of color receivers, a portable FM radio that was half the size and weight of previous radios, and the first all-transistor color television set sold in the U.S. International expansion continued.

Motorola began making components for battery powered quartz watches in 1972. As a result, the firm gained familiarity with integrated circuits, quartz crystals, and miniature motors. Two years later, Matsushita Electric Industrial Co. bought Motorola's television operations. Acquisitions during the late 1970s included data communications network systems maker Codex Corp. and communications equipment manufacturer Universal Data Systems. The firm also added advanced integrated circuits to all of its radio communications products. Making its first foray into the microprocessor industry, Motorola launched a 16-bit microprocessor in 1979; the new product was first used in electronic components for the auto industry.

Sales reached $3 billion in 1980. Motorola paid $253 million for computer system maker Four-Phase Systems, Inc. in 1982. Nippon Telegraph and Telephone ordered roughly 43,000 Pocket Bell pagers from Motorola that year. Four-Phase, Codex, and Universal Data were combined to form a new Information Systems division, which launched a 32-bit microprocessor in 1984. Motorola's paging division constructed a new plant in Boynton Beach, Florida; it also began transforming the devices from one-way receivers into two-way appliances able to handle various data formats. By then, the firm was also supplying cellular phone systems—technology it had first developed in the mid-1960s—to New York, Philadelphia, Beijing, and Hong Kong. As part of a major shift in focus, Motorola exited the car radio industry. The following year, Congress awarded the first Malcolm Baldridge National Quality Award to Motorola. The firm created Motorola Lighting Inc. to manufacture electronic ballasts for the lighting industry. It also unveiled the world's smallest cellular phone, the Micro-TAC, which became the industry's best selling product. Motorola's success in the cellular phone market was marred by its losses in computer systems, however, which reached roughly $200 million in the late 1980s.

Motorola created Iridium Inc. in 1991 to oversee a satellite communications system that allowed mobile telephones to operate worldwide; however, the unit's poor performance eventually cost the firm millions of dollars in writeoffs. Unisys Corp. and Motorola forged a semiconductor technology alliance in 1992. The firm also created Motorola-Nortel Communications in conjunction with Northern Telecom as a joint cellular network marketing venture. International expansion continued with new plants in China and India. In 1994, Motorola landed a contract to construct the first digital mobile phone system in Russia. The firm diversified into digital modems in 1995. The following year, the firm discovered that cable television lines could be used to offer Internet access to home computer users and began investigating ways to capitalize on this new market. Intense competition in the U.S. cellular telephone industry undercut sales, prompting the firm to lay off 225 employees. To bolster its cellular phone sales, the firm launched the StarTAC phone in 1996. Although the StarTAC was initially highly successful, digital technology had already begun to replace the analog technology that powered StarTAC, a fact that later earned Motorola sharp criticism from shareholders.

In the mid-1990s, Apple, IBM, and Motorola joined forces to create PowerPC, a microprocessor chip designed to compete with those manufactured and marketed by Intel Corp. However, PowerPC failed to penetrate the mainstream market. In 1997, Motorola established an Internet software division. By the late 1990s, semiconductor sales growth had ground to a near halt, and the firm's share of the U.S. cellular phone market fell to 41 percent from a high of 54 percent. Losses in 1998 totaled roughly $1 billion. In an effort to recapture lost market share, Motorola finally created a line of digital phones, known as the V-Series, in 1999. The firm also acquired Software Corporation of America, Inc. and the portion of wafer manufacturer Tohoku Semiconductor Corp. it did not already own.

In January of 2000, Motorola paid $17 billion for General Instrument Corp., which it folded into its newly established Motorola Broadband Communications Sector. The purchase gave Motorola access to General Instrument subsidiary Next Level—a high-speed Internet access provider—as well as to the alliances General Instrument had forged with TCI, the cable arm of AT&T Corp. Other acquisitions that year included network processor developer C-Port Corp., printer acceleration specialist WaveMark Technologies, Inc., and software development tools maker HI-WARE AG. The firm also divested its lighting unit. While sales of both personal communications devices and semiconductors declined that year, sales of cable modems and digital set-top boxes increased by roughly 50 percent. The broadband unit accounted for 8.4 percent of total revenues, a figure which Motorola planned to bolster in coming years.