Beware of great products. They could imperil your company. Poor old Motorola is now under threat from corporate raider Carl Icahn, veteran of takeovers at Texaco and TWA, who is now demanding a seat on the Motorola board after buying 1.4 per cent of the company’s shares.
No one thinks he'll stop there.
A little over two years ago, Motorola came out with a killer product, the RAZR cellphone, which was to get Motorola back into the fight with Nokia.
The RAZR hit the market in November 2004, sold 50m units in two years, became the fastest-ever selling cellphone, and drove Motorola’s market share up from 16.3 per cent in Q4 04 to 20.3 per cent in Q4 06.
And that was the problem. In order to get back its reputation as the world’s No.1 mobile radio company, lost in the 1990s to a Finnish company better known for rubber boots and wood pulp, Motorola heavily discounted the RAZR, and pushed for market share.
It has been doing that ever since. In Q4 06 its margins were a measly 4.4 per cent. Enter Icahn.
Just as, in golf, you drive for show but putt for dough, in the corporate world share’s for show, margin’s for dough.
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