ZTE: Hello MOTO?

With Motorola Inc.¡¯s prominent competitors such as Nokia, Samsung and LG Electronics all turned up their noses at the idea of acquiring its ailing mobile handset operation, there appears to be growing interest among smaller Asian telecommunications companies about working with Motorola.

A Website run by the Financial Times has reported that unnamed Asian suppliers have been talking with Motorola about forging an alliance. Since Motorola¡¯s mobile devices unit lost $1.2 billion last year, Motorola¡¯s new CEO Greg Brown continues to predict more gloom and doom for the unit in the next few months.

The unit accounts for about $19 billion of Motorola¡¯s $36.62 billion in 2007 sales and will probably require a partner, or partners, with deep pockets to help bail it out. Billionaire investor Carl Icahn, who has been pressuring Motorola to sell various units for months, is also urging the company to sell the unit or enter into a beneficial financial partnership. Icahn and his investors own more than 6 percent of Motorola¡¯s shares.

Is it ZTE?
Motorola has been talking for months with China¡¯s ZTE Corp., which has ambitions to grow its mobile phone market share.

Investment banking analysts have expressed confidence that Brown, who has a telecom background, can fix the handset operation if he gets the time and money to do it. Outgoing CEO Ed Zander, who came from Sun Microsystems, had a computer background and never understood the finer points of the cellphone and telecom business.

Motorola¡¯s mobile phone freefall became evident last summer when Samsung pushed Motorola into a third place market-share ranking. Nokia has been in first place for years. Motorola has responded by introducing a brace of new handsets, installing a new management team, lowering inventory and reducing its workforce. But so far, nothing has turned the tide.

- W. David Gardner
InformationWeek