There is no end to the humiliation the old Motorola guard is being forced to endure. Google’s (GOOG) top executives keep making disparaging comments about Motorola handsets. Many Motorola leaders have effectively been hounded out of the company via insulting contract negotiations. And now a legendary Apple (AAPL) star, Guy Kawasaki, is being brought in to teach the grandmother of the cell phone industry how to dance the Harlem Shake. Kawasaki is mostly known for his contribution in developing some of Apple’s most successful computer marketing campaigns, notably for Macintosh back in the Eighties.
Google’s anxiety over Motorola’s lackluster performance has spiked over the past year as Samsung (005930) has risen to utterly dominate the Android phone market. Google’s original plan was to turn the Android ecosystem into a kind of Versailles where it would play the role of the Sun King, favoring HTC (2498) this year and Motorola the next, carefully maintaining a balance between the handset aristocracy.
Then HTC, LG (066570) and Motorola all screwed up simultaneously, allowing Samsung to grab total power. It is darkly comical that when Google bought Motorola in the summer of 2011, people were seriously worried that this would give Motorola an insurmountable advantage over Asian vendors.
Since then, Motorola’s position at even U.S. carriers like AT&T (T) and T-Mobile has eroded badly, turning the brand effectively into a Verizon (VZ) house label. Motorola has built an R&D and manufacturing base in Brazil, but its Latin American advances have stopped since a promising period around 2010. The entire Motorola strategy of designing separate phone lines for different operators has been an unmitigated disaster as the industry pivoted to the opposite direction. Apple and Samsung’s winning strategy has been to create a single massive flagship line that is sold to dozens of operators across the world.
Motorola is now trying to copy the Appsung strategy and create one massive blockbuster model that would stem the slide towards irrelevance. Kawasaki may have been brought in to mastermind the marketing plan for this big bet. The problem is that Google’s haughty and insulting treatment of Motorola executives has created a massive brain drain. The old teams have been blown up and Google is struggling to recreate product development units that can manage integration of new technologies into a cutting edge phone combined with realistic planning for effective production ramp-up.
The high-end smartphone business has become fiendishly complicated because Apple and Samsung have sped up the development cycle while simultaneously hogging crucial component supply. Companies like Nokia (NOK), LG and BlackBerry are now struggling badly to reach decent production volumes for key models. Planning a new phone requires a very tricky combination of engineering and predictive supply chain management.
Google has driven much of Motorola’s key talent out of Chicago and it now needs to quickly find a way to rebuild what it demolished. Needless to say, much of the top talent would rather work for Apple, Samsung or emerging global powers like Huawei.