Posts Tagged ‘Motorola Mobility’

The Chinese Moto into Chicago

Monday, February 3rd, 2014

It’s a strange experience to attend a tech conference like I did last Thursday and have no one — not the audience or the speakers — mention the biggest tech story of the year. It’s a little like attending a family reunion and having nobody comment on your Aunt Mary’s 25-year old boyfriend.

Motorola Mobility is being sold by Google to Chinese computer powerhouse, Lenovo. You remember them — the company that bought IBM’s ThinkPad division in 2005. They paid $2.9 billion and it’s for one reason: to enter the smartphone war against Apple and Samsung. It’s the largest ever deal by a Chinese tech company (although a relative bargain when you consider that Google paid $12.5 billion for Motorola — primarily for its patent portfolio which it will license to Lenovo.)

For Chicago, the sale comes weeks away from the biggest real estate move of the last year: Motorola moving more than 2,000 workers into the Merchandise Mart and becoming the biggest tech employer downtown. Lenovo says it will all move ahead with no plans for layoffs.

The reason a Chinese tech behemoth with resources pays for an American company is twofold — brand and know how. “Motorola brings a strong brand, brilliant engineering and strong relationships with carriers and retailers.” said Lenovo CEO Yang Yuanqing.

In a blog for Crain’s Chicago Business, John Pletz spells out the challenges: Today, it (Motorola) has just 1 percent global market share, putting it in 16th place among the top cellphone vendors, according to research firm Strategy Analytics Inc. That’s down from No. 2, with 22 percent share, in 2006, when Motorola’s Razr phone was the must-have device.

After the acquisition, Lenovo will be No. 3, with 6 percent of the smartphone market, which accounts for most of the cellphone industry’s profit, according to Strategy Analytics. Samsung is No. 1 with 32 percent of shipments, followed by Apple, with 15 percent.

Chicago’s Tech Boom

Thursday, September 6th, 2012

Chicago’s high-tech community wants to lure the area’s start-up companies back to 1871 — the year that the Chicago Fire burned the city to the ground.  1871 is the name of a 50,000 SF space on the Merchandise Mart’s 12th floor designed to house entrepreneurs seeking a collaborative and flexible work environment.  The name reflects the spirit of innovation that rebuilt the city after the 1871 fire, said Kevin Willer, president of the Chicagoland Entrepreneurial Center (CEC).

The non-profit CEC operates the space with support from venture capitalist J.B. Pritzker and the State of Illinois, as well corporate sponsorship from companies such as Comcast and Cisco Systems, Inc.  Willer and Matt Moog, founder and chief executive of Viewpoints Network,  led efforts to create a focal point for Chicago digital technology start-ups.

Chicago is a national leader in start-up companies.  Writing in Forbes, Kelly Reid notes that a new start-up is formed in Chicago every 48 hours.  “It takes about 10 years for a first wave of start-ups to succeed or fail, and those that make successful exits begin investing their own money and mentoring the next generation.   According to Built in Chicago, it takes about two of these cycles — or 20 years — to build an entrepreneurship community.”  Chicago is “right at the beginning of the boom.  There were about as many digital start-ups founded in 2009 (72) as there were in the prior two years (73).  In 2010, the trend continued; 107 between 2008 and 2009 and 98 in 2010.   The 193 companies founded in 2011 buck the trend; there were only 170 companies founded in the prior two years, indicating very positive growth. 193 start-ups in a year amounts to a new company founded every two days.”

According to USA Today and the National Capital Venture Association,  San Francisco (not surprisingly) is the nation’s leading home of start-up tech firms, with Boston occupying second place.  These are followed by New York, Los Angeles, Washington, D.C., San Diego, Chicago, Boulder/Denver and Seattle.

Employment growth in the high-tech sector is fueling strong rental rate growth and declining vacancies in tech-oriented office markets of San Francisco, New York and Seattle, among others, according to CB Richard Ellis.   “The strengths of these tech-centric office sub-markets, with the strong rental rate growth and declining vacancies, are major factors supporting the overall office market recovery,” said Colin Yasukochi, CBRE’s director of research and analysis.  According to Yasukochi, “With the high-tech economy growing nearly six times faster than the national average, we expect that these sub-markets will continue to outperform.”

Willer points out that the CEC isn’’t an incubator, but a collaborative workspace where entrepreneurs can bounce ideas off each other.  Venture capital and angel investors also have a presence at the CEC.  “Economic development is about creating new enterprises as well as supporting corporations that are already here,” Willer said, noting that he hopes 1871 will become part of the Chicago’s tech “ecosystem”.  Chicago  start-ups raised $1.45 billion raised in 2010, the majority from Groupon  which is evidence that there is an energetic tech community in the city.

Demand for 1871 space exceeds the supply.   “On the first day we had 50 applications from companies come in,” said Steve Collens, senior vice president with The Pritzker Group. “They continue to pour in,” he said.  “The reality is that there are just very few co-working spaces here.  People are scattered from Ravenswood to River North to the West Loop.”

Chicago’s largest tech company lease in seven years was 572,000 SF, which Google leased for its Motorola Mobile subsidiary, also in the Merchandise Mart.

Is the Motorola Mobility-Google Marriage Made in Heaven?

Tuesday, October 4th, 2011

Google’s recently announced $12.5 billion acquisition of Chicago-based mobile phone maker Motorola Mobility could be different if Google CEO Larry Page keeps his promise to run the acquisition as “an independent business.”  “If you believe what they say, they’re going to leave the company alone and let it do what it has been doing,” said Steven Kaplan, a professor at the University of Chicago’s Booth School of Business.  “If anything, maybe they would move resources here because the tech talent is less expensive and our taxes are lower (than California’s).”

There remains the question of the economic impact of the sale on Chicago’s economy, especially in northwest suburban Libertyville, IL, where Motorola Mobility has its sprawling campus.  If Google retains Motorola Mobility’s Illinois workforce, the move will represent a win for the state, giving it the bragging rights that come with being part of one of the world’s wealthiest and most entrepreneurial companies.  If Google moves Motorola Mobility to California, it will be a blow to Chicago’s northwest suburbs, where many of Mobility’s employees live.

Motorola Mobility has deep roots in the Chicago area, which go back to the 1928 founding of Galvin Manufacturing Corp. in Chicago.  The company, which was rechristened Motorola, pioneered early televisions and two-way radios during the World War II years.  Motorola helped lay the foundation for the mobile-phone industry, and demonstrated its original handset in 1973.  “Motorola was a pioneer in this business,” said Will Strauss, an analyst at Tempe, AZ-based Forward Concepts Co.  “They certainly have a lot of intellectual property.  It will certainly level the playing ground quite a bit. It’s going to give them an awful lot to defend Android with.” 

One reason for the purchase is the patents that Google will acquire as part of the acquisition.  Google pointed to patent disputes as important in its agreement to buy Motorola Mobility.  Apple, the iPhone’s manufacturer, and Microsoft, which created Windows Phone software, have targeted phones that run on Google’s Android system.  Lacking its own trove of patents to vie with Apple, Microsoft and other companies, Google and its hardware partners were targeted by suits aimed at slowing the adoption of Android smart phones.  Adding Motorola Mobility, with 17,000 patents, which has been inventing mobile-phone technology since the industry began, may help Google stanch the onslaught.

“The analogy to a nuclear arms race and mutually assured destruction is compelling,” said Ron Laurie, managing director of Inflexion Point Strategy LLC, which counsels companies on purchasing intellectual property.  Google and its rivals “look pretty evenly matched at the moment.  Google may have become a patent superpower.”

Google plans to continue to license its Android system to other smart phone makers, such as HTC, Samsung and LG. ”Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them,” according to Page.  According to analysts, the Motorola deal is likely to help Google expedite its innovation in smart phones and tablets.

Bernstein Research analyst Pierre Ferragu believes the acquisition was “solely driven by the ongoing patent war and is an unambiguous positive for the Android ecosystem.  It is in the interest of Google to continue to offer a fully open Android platform with equal access to all manufacturers.  For Google, there is much more value in securing a major market share for Android than favoring Motorola against HTC and Samsung,” Ferragu wrote.

 Writing in The Business Insider, Henry Blodget predicts that the deal will be a “colossal disaster.”  According to Blodget, there are multiple reasons why this venture will fail.  “Google is a massive global software company with huge profit margins, genius engineers, extraordinarily high pay scales, and a near-monopoly on the most amazing advertising business the world has ever seen.  Motorola is a has-been, low-margin, global hardware-manufacturing business that operates at break-even, has 19,000 employees — 19,000!  Motorola, in other words, is a VAST company, one that will increase the size of Google by a staggering 60+ percent.  Mergers of this size rarely work well (or smoothly), even when managed by companies that are very experienced at making huge acquisitions (which Google isn’t).  Motorola does not have dominant share of the key businesses Google is buying: smart phones, tablets, and TV gadgets.  This means it does not have the weight necessary to push anyone around.  For example, Motorola only has a small slice of market share (10 percent) in its key business (smart-phones).   It’s nowhere in tablets.  The only way to make decent money in the hardware business is to have real leverage, and Motorola doesn’t have it.  The only thing that Google and Motorola have in common is that they are loosely considered ‘technology’ businesses.  This is not enough commonality for a massive merger like this to be a success without heroic integration efforts.  (Think AOL-Time Warner).”