From FORTUNE 34th position to "Oh, they still exist", How???

Getting outflanked by tech upstarts, hacked in two by a fearsome corporate raider, and finally taken over in part by a Chinese company that exists largely because of the world Motorola made for it: Such a fate would have been unthinkable 20 years ago. Motorola was then one of America’s greatest companies, having racked up a stunning record of innovation that continually spawned new businesses, which in turn created enormous wealth. Motorola had the vision to invest in China long before most multinational companies. It even developed Six Sigma, a rigorous process for improving quality that would be embraced by management gurus and change the way companies nearly everywhere operate.

However, as the history of many giant corporations (Lehman Brothers, General Motors) shows, great success can lead to great trouble. Interviews with key players in and around Motorola and its spinoffs indicate that the problems began when management jettisoned a powerful corporate culture that had been inculcated over decades. When healthy internal competition degenerated into damaging infighting. “I loved most of my time there,” says Mike DiNanno, a former controller of several Motorola divisions, who worked at the company from 1984 to 2003. “But I hated the last few years.”

Motorola began as Galvin Manufacturing Corporation in 1928, just before the Great Depression, founded by a 33-year-old native of Harvard, Illinois, named Paul Galvin. Its small offices stood on Chicago’s West Harrison Street, a dozen blocks from the Loop. Two years later came the company’s first big breakthrough: commercializing the first mass-market car radio by figuring out how to eliminate static interference from under the hood. But success didn’t come easily, says Paul’s grandson Chris Galvin, who ran Motorola from 1997 to 2004. Paul was a serial entrepreneur, and two previous ventures of his had flopped. “The company’s success,” Chris explains, “was born of failures.”

As Paul and his brother Joe built the company, they created an environment that drove people to invent and fail and learn and invent again. Motorola became known for its culture of risk taking, its investment in training and development, and it’s almost fanatical insistence on respectful dealings among employees.

In its early years of nonstop innovation, the company would make plenty of consumer electronics, including home radios and TVs. But Motorola’s bread and butter was technologies and devices sold to other enterprises, particularly those charged with public safety and defense. Two-way radios used by police, walkie-talkies carried by soldiers in World War II, microwave radio systems for civil defense communications—under Paul Galvin, Motorola invented them all.

The public safety business, says Martin Cooper, the electrical engineer who led the company’s development of the first cellular phone, “was really the essence of what we did.” Working at Motorola was more than a job. It was a mission.

 In 1942, tragedy struck: Paul’s wife, Lillian, was murdered by an intruder in their Evanston home. The case remains unsolved. After her death, the Galvins, citing inheritance taxes, took their company public. But Motorola still felt like a family operation. In 1956, when Paul decided to step down as president (the title Motorola then used to denote the head of the company), his 34-year-old son, Robert, took his place.

What the father built nationally the son scaled up globally. Charismatic, farsighted, and fiercely competitive, Bob Galvin would be hailed as one of the greatest American industrialists of the 20th century. From 1959 to 1990 (the year he stepped down as chairman), the company’s annual revenues ballooned from $290 million to nearly $11 billion, making Motorola one of the 50 largest companies in the nation.

Bob Galvin, and the immediate successors he helped choose, firmly believed that competition drives excellence. Because Motorola faced little external competition back then, explains Chris Galvin, “we had to create our own competition internally.” For example, the CEOs pitted divisions against one another by dangling bonuses for top performance.

Such internal competition helped two complementary businesses boom in the Bob Galvin years and just after: communications and semiconductors. Motorola’s communications division made networks, radios, and phones for government and corporate customers. Its semiconductor division supplied chips to the communications division and, later, to outside companies such as Apple.

Not every important Motorola innovation during Bob’s time led to a physical product. For example, in the early 1980s—a period when American companies were struggling to compete with superior products pouring out of Japan—Motorola developed a system for total quality management called Six Sigma. (A Six Sigma process is one in which 99.99966 percent of products are free from manufacturing defects.) A good chunk of the Fortune 500, including General Electric, IBM, and Boeing, wound up adopting it.

No wonder Bob Galvin achieved almost godlike status among many Motorolans. Phil Cerney, who worked at the company from 1959 to 2009, rising to accounting director (he’s now the controller at Palladium Energy in Woodridge), calls him “the second greatest man I ever met, after my dad.”

Motorola's adoption of 'Total Quality Management' (TQM) principles during the 1980s furthered that push for quality and earned it the admiration of analysts and competitors alike. Building on the foundation laid by his employee empowerment programs of the 1970s, Robert Galvin was able to instill a drive for continuous quality improvement in his teams of workers. From 1981 to 1986, Motorola reduced its defect rate by 90 percent. By 1992, the company had achieved 'six sigma quality': less than 3.4 mistakes per million. The corporation did not sacrifice productivity for these quality improvements, either: from 1986 to 1994, sales per employee increased 126 percent, in spite of a net increase in the workforce. Some divisions had achieved such high quality rates that they were striving to reduce error rates to defects per billion in the 1990s. The corporation's ongoing goals were to reduce error rates tenfold every two years and simultaneously reduce production time tenfold every five years. Motorola's campaign for quality was highlighted by its 1988 receipt of the first annual Malcolm Baldrige National Quality Award. That year, George Fisher succeeded Robert Galvin as CEO, becoming the first non-Galvin to head the company.

Of all Motorola’s inventions, none were as transformative as the cell phone. A request from Orlando Wilson, Chicago’s police chief from 1960 to 1967, provided the impetus. Violent crime in the city was surging. Wilson wanted his patrol officers out of their cars and on foot, but he didn’t want them on the street without a way to stay connected.

Cooper, among others, envisioned a solution: a handheld phone that functioned on a wireless cellular network. Bob Galvin realized that the market for such a device could extend well beyond law enforcement. So he committed $100 million to developing it. In 1973, Cooper made his first call—to a rival at AT&T’s Bell Labs—on a boot-size prototype.

It wasn’t until 1984, two years before Bob Galvin retired as CEO, that a model—the DynaTAC—was ready to go to market. After that, the cellular business “exploded,” says DiNanno: “It was the glamour sector of the company, the industry, and the country.”

In 1989 Motorola introduced the world's smallest portable telephone, but soon found that its new product was excluded from the Tokyo and Nagoya markets, two cities that together represented more than 60 percent of the $750 million Japanese cellular phone market. When Motorola cried foul, the Japanese government agreed to allow adapted Motorola phones in Tokyo, but only for use in automobiles. This excluded the 90 percent of portable phones used on trains. In response to these restrictions, Motorola led the push to impose trade sanctions on certain Japanese imports. Then-President George Bush publicly accused Japan of being an unfair trading partner and threatened to take punitive action if the Japanese did not remove barriers to free trade.

The growth of the computer industry provided both opportunities and challenges for Motorola. Throughout the 1980s, the company's most popular 68000 family of microchips powered personal computers (PCs) and workstations built by Apple Computer, Inc., Hewlett-Packard Company, Digital Equipment Corporation, and Sun Microsystems, Inc., among others. Upstart competitor Intel Corporation, whose chips were the cornerstone of International Business Machines Corporation (IBM) and IBM-compatible PCs, launched a successful campaign to capture the microchip market. Intel combined ever-increasing power and speed with aggressive marketing to win the semiconductor market from Motorola. Undaunted, Motorola teamed up with industry giants Apple and IBM to develop the PowerPC in the 1990s. Throughout most of the 1990s, Motorola maintained the number three ranking among the world's semiconductor manufacturers, behind Intel and Japan's NEC Corporation.

From 1959 to 1990 (the year he stepped down as chairman), the company’s annual revenues ballooned from $290 million to nearly $11 billion, making Motorola one of the 50 largest companies in the nation.

In many respects, however, Motorola's computer chip operations were eclipsed by its communications interests during the 1990s. The company's 45 percent leading share of the global cellular phone market and whopping 85 percent of the world's pager sales forced it to place an increased emphasis on consumer marketing in the early 1990s. Accordingly, Motorola recruited market specialists from General Electric, Black and Decker, Apple, and (as Fortune put it in a 1994 article) 'even Mattel.' The company began selling its pagers at mass merchandisers and offering them in a variety of colors. Evidence of its reentry into the consumer market after nearly 20 years came in the form of a 1993 television and print campaign targeted at women (especially mothers).

Over the course of the 1980s, Motorola's sales and profits tripled, to $9.6 billion and $498 million, respectively, in 1989. By 1993, sales vaulted more than 56 percent to $16.96 billion and earnings more than doubled to over $1 billion. The company underwent its third transfer of power that year, when Robert Galvin 'retired' to the office of chairman of the board's executive committee at the age of 71, at the same time that Fisher left to take the top spot at Eastman Kodak. Gary L. Tooker, former president and chief operating officer, advanced to the chief executive office, and Galvin's son Christopher assumed Tooker's responsibilities.

Although some analysts worried that Motorola, like many other large, successful corporations, would fall into complacency, that fear did not seem well founded. The company earned a reputation for 'self-obsolescence' that seemed likely to keep it in the vanguard of wireless communication. For example, the Motorola Integrated Radio Service (MIRS) combined features of cellular phones, pagers, and two-way radios in a system that could rival all three. Motorola hoped to undermine the cellular 'duopolies' organized by the Federal Communications Commission by operating the system over Specialized Mobile Radio (SMR) frequencies that had been limited to use by taxis and tow trucks.

Continuing globalization at Motorola focused on Asian, Eastern European, and Latin American markets in the early 1990s. In 1993, the company announced 'Corporate America's biggest manufacturing venture in China': two plants for the manufacture of simple integrated circuits, pagers, and cellular phones. By 1995 sales in China and Hong Kong had almost doubled, reaching $3.2 billion, nearly 12 percent of overall Motorola revenues.(Its important that they set the Chinese for industry.

So Bob insisted that Motorola bring its best technology to China and that the company’s factories there manufacture to the strictest standards. Hundreds of Chinese suppliers, including state-owned firms, learned how to make things the Motorola way. Those suppliers, which had second- and third-tier suppliers of their own, spread that knowledge throughout a growing swath of China’s economy. Motorola also helped China build its national communications networks, using technology that leapfrogged that in the States. Altogether, Motorola did more than just about any other foreign company to create a market-ready Chinese industrial complex)

In 1994 Motorola rose to 23rd on the Fortune 500 list of the nation’s biggest public companies. By 1994, 60 percent of the mobile phones sold in the United States were Motorolas, with the wireless business making up nearly 65 percent of the company’s revenues.

The good times at Motorola lasted through 1995, a year in which the company posted profits of $1.78 billion on sales of $27.04 billion. The latter figure was nearly triple the company's 1989 revenue figure. Then, seemingly, Motorola took a sudden downturn. Revenue growth slowed dramatically and profits fell. In 1997 the company reported net income of $1.18 billion on sales of $29.79 billion. There were numerous reasons for the downturn, including price wars in and declining sales of cellular phones, slumps in the semiconductor and paging industries, troubles at Apple Computer which impacted sales of the PowerPC chip, and the Asian economic crisis which began in 1997. Perhaps most importantly, however, Motorola seemed to have lost its ability to stay on the cutting edge of technology, particularly in the wireless telephone field. Motorola had dominated the wireless world in the analog era, but it was not fully prepared when the switch to digital technologies began in the mid-1990s. Because it hung onto its cellular technology for too long, its share of the U.S. wireless phone market plunged from 60 percent in 1994 to 34 percent in early 1998.

In the midst of these travails came another leadership change. In January 1997 Tooker moved into the chairmanship, while Christopher Galvin took over as CEO. The appointment of Galvin, whose background was in marketing and management rather than engineering, was well-timed; a number of observers had concluded that Motorola's troubles stemmed at least in part from its inability to listen to its customers. The company's autonomous divisions were creating products--many of them innovative--without first determining if the market desired them. The autonomous structure created further problems. Motorola's paging, cellular, two-way radio, and satellite communications units operated as separate divisions, and in the company's decentralized structure did not collaborate with each other, despite the increasing amount of overlap in these technologies. Galvin attempted to address these problems through a 1998 restructuring that merged all of the company's communications operations into a new entity called the Communications Enterprise. Within this organization were created several customer-focused sectors, with the three main ones being:

Personal communications, which served the consumer market and included wireless phones, pagers, and some two-way radios;

Network solutions, which served telecommunications providers and concentrated on wireless-telephone infrastructure and satellite communications; and

Commercial, government, and industrial solutions group which was created to design and build communications systems for large organizations.

Motorola's semiconductor and integrated circuit operations were also restructured in the late 1990s; these units were reorganized into two areas: the Semiconductor Products Sector, which adopted a concentration on embedded semiconductors, and the Integrated Electronic Systems Sector, which focused on embedded electronic systems for various industrial markets. Motorola began winding down its involvement in the general-purpose semiconductor sector, a process that culminated in 1999 with a management buyout, led by Texas Pacific Group, of the Semiconductor Components Group. As part of the transaction, Motorola received $1.6 billion in cash and a ten percent stake in the new company, renamed ON Semiconductor. Galvin's restructuring efforts also included the launch in mid-1998 of a 12-month program of factory consolidation, divestments of underperforming units, and asset writedowns; as well as the elimination of 15,000 workers from the company payroll, a ten percent workforce reduction. Motorola took a $1.95 billion charge related to the restructuring, leading to a net loss for 1998 of $962 million; sales fell one percent from the previous year, to $29.4 billion, as a result of the divestments.

It appeared that 1999 might be considered a turnaround year for Motorola, as revenues surpassed the $30 billion mark for the first time, despite the divestment of the commodity semiconductor business; the company also returned to profitability. Motorola finally began selling substantial numbers of digital cellular telephones during the year, although sales were hampered by shortages of certain components. The company was also returning to the cutting edge through its attempt to develop a new technology to deliver voice, data, and video from the Internet to wireless devices. This endeavor was telling in that Motorola, an historically go-it-alone company, was partnering with Cisco Systems Inc. and Sun Microsystems Inc. In addition to forging alliances, Motorola was also working to shift from being strictly a maker of hardware to being a software designer as well. For example, the company was working to equip all of its cellular telephones with an Internet browser.

Motorola also turned to the acquisition route in 1999, in a very large way, with the announcement of a $17 billion stock swap for General Instrument Corporation, the leading maker of broadband set-top boxes. Completed in early 2000, this was the largest acquisition in Motorola history, and it gave the company a significant presence in the emerging broadband telecommunications sector. Broadband visionaries spoke of a dramatic convergence whereby all the main telecom services--telephony, cable television, video, e-mail, high-speed Internet access, and interactive gaming--would be delivered to a television via a single set-top box. Following the completion of the acquisition, General Instrument became the new broadband communications sector within the Communications Enterprise. This new sector also included Motorola's existing cable modem operations. General Instrument also brought to Motorola its 67 percent stake in Next Level Communications, a supplier of the emerging digital subscriber line (DSL) technology. With DSL, basic copper telephone wires were able to be used for high-speed Internet access.

A dark cloud hanging over Motorola as the 21st century began was the Iridium satellite phone system.

Motorola continued work on its multibillion-dollar 'Iridium' project (launched in 1990 then spun off as a limited partnership), a plan to wirelessly interconnect the entire globe through a system of low-earth-orbiting satellites (LEOS), with a projected completion date of 1998.

Iridium is goal was to launch space satellites to connect the world with its wireless phone services, sounds a lot like Elon musk's SpaceX starlink, right?

Which began operation in late 1998 following $5 billion in development costs. Iridium immediately began having technological glitches and, even though it allowed its users to use their cellular phones anywhere on the planet, suffered from low demand because of its extremely high rates (e.g., $3 per minute calls). In August 1999 Iridium LLC, in which Motorola held an 18 percent stake, began operating under bankruptcy protection. Motorola subsequently took a $740 million charge related to Iridium in late 1999, leaving it with a $460 million cash exposure to the venture. In early 2000 Motorola also faced a possible $3.5 billion lawsuit from a group of Iridium bondholders. (Although iridium creditors won 300 million dollars from Motorola in 2002 the later trials were settled at no cost to Motorola in 2008).

Despite these setbacks, Motorola was moving forward with another, even larger satellite venture, Teledesic L.L.C., in which it was the chief contractor and held a 26 percent stake. A $10 billion project, Teledesic aimed to create, by 2004, a low-orbit satellite system for the delivery of voice, data, and high-speed Internet access to handheld devices. Motorola's prominent involvement in the satellite and broadband ventures, however risky they might be, provided ample evidence that the company was back on the technological cutting edge.

The glitch behind the scene was running is top management culture set by Galvin. Here is the result of that.

(Top management believed in letting the sector guys run the businesses their way. If that rubbed others the wrong way, tough luck.’

Former Motorola executive Mike DiNanno

The biggest first step to part Motorola. It set the basics for slowing the growth.  

The era of “warring tribes,” as Motorolans refer to it, had begun. Screaming fights between sector heads rattled the corporate halls. CEOs William Weisz (1986–88) and then George Fisher (1988–93), committed to the strategy of stirring up internal competition, did little to stop them. “Top management believed in letting the sector guys run the businesses their way. If that rubbed others the wrong way, tough luck,” recalls DiNanno. As a result, he says, there was “no cohesive plan for network technology and handset technology. The two operated totally independently, in totally different directions.”

On the network side of the business, Motorola had been an early developer of the digital cellular technology that was supplanting the old analog cellular system in Europe and Asia. Its digital network patents were yielding a lucrative stream of royalties. Yet, incredibly, the handset division saw no urgency to switch from analog to digital.

So Motorola’s network engineers simply went their own way. DiNanno describes working with “a thousand” of them in the 1990s, all using digital phones made by Qualcomm, one of Motorola’s bitterest rivals in telecom semiconductors. “There was not a Motorola phone anywhere in the building,” he marvels, “even though the other side of the company was engaged in a bloody fight against Qualcomm that went on for years.”

It took a while for the looming disaster to show up in the company’s numbers. Indeed, thanks largely to its still-growing cellular business.

But Motorola was about to fall off a cliff. Because Finnish rival Nokia had wisely retooled for digital, by the time Gary Tooker’s four-year run as CEO ended in 1997, Nokia had surpassed Motorola as the world’s largest mobile phone maker. It had become a newly powerful competitor in building networks, too. Nokia would remain the world’s largest maker of mobile phones by volume—if not by revenue—for the next 15 years).

World events seemed to conspire against Chris Galvin, too. The tech and telecom crash that began in 2000 hammered Motorola’s stock. (Its price fell nearly 40 percent during his seven-year tenure as CEO.) The 2001 World Trade Center attacks and the 2002 SARS scare halted the company’s international supply chains and crushed sales. In 2001 alone, Motorola’s revenues plunged by nearly $8 billion, to $30 billion; its losses neared $4 billion.

To limit the damage, Chris Galvin(CEO at that time) eliminated 56,000 of the company’s nearly 150,000 workers. He closed plants, including a new $90 million one in Harvard, Illinois, the town where his grandfather Paul grew up. One bright spot: the public safety division, where orders were picking up following 9/11 and where margins were high. Still, says DiNanno, “by the early 2000s we were in trouble, and everyone knew it.”

By realizing the company and market situation they deliberately think of to do something to recover themselves so Chris pinned his hopes on developing and marketing a sexy new digital-ready phone. So they come up with Razr. The Razr would be thin and nearly all metal; it would fold up and exude luxurious design. He didn’t survive in the job long enough to see it launched.

One of the cruel facts about corporate life is the phenomenon of executive luck. “An executive who inherits a very challenging situation and makes a lot of the right moves can run out of runway before he or she is able to gain sufficient altitude,” says David Garfield, a managing director at Chicago management consulting firm AlixPartners. “Sometimes [a successor] gets the benefit.” Chris Galvin, it seems, had uncannily bad executive luck.

A fit 64-year-old with Irish-blue eyes, Chris Galvin wears a custom shirt with a monogrammed cuff as he sits down to discuss his ouster. “One day [in September 2003], I was in my office and two board members came to see me and to apologize,” he says, recounting the moment deliberately. “One of them was genuinely remorseful. The company, they said, was in such terrible shape that the board decided it must do a shocking removal of the CEO. Typically, that only happens when a company is going out of business or there is an integrity issue. But not in this case.”

Chris handed in his keys during the first week of January 2004. Seeing him walk through the Motorola cafeteria for the last time, Phil Cerney was overcome. “I turned to the person next to me,” Cerney remembers, “and said, ‘This is going to go down as the worst day in the company’s history.’ ”

‘I turned to the person next to me and said, “This is going to go down as the worst day in the company’s history.”’

Phil Cerney.

Shortly after the board showed Chris the door, the Galvin family decided to begin selling its 3 percent stake in Motorola, worth about $720 million at the end of 2003. A few years later, the Galvins were out of Motorola completely.

Chris founded Harrison Street is the first firm to apply the principles of Six Sigma to the real-estate business, as Chris says.)

Three months after Chris Galvin left Motorola, the company’s numbers began to turn around dramatically. The Razr proved to be a monster hit, with 50 million selling in its first two years on the market. By the end of 2004, Motorola’s market cap—the market value of its outstanding shares—hit $42 billion. The person celebrating was Galvin’s replacement, Ed Zander.

Formerly the COO of pioneering computer company Sun Microsystems (now owned by Oracle), Zander was a skilled corporate showman who entertained with verve and humor. At a leadership seminar in Silicon Valley after he took the job, Zander joked to the audience that the Motorola he inherited was so slow moving, so blind to the coming convergence of telecommunications technologies, that he cried on his first day.

With the success of the Razr, he could soon put his tears on hold. Motorola began generating billions in cash. In Zander’s first two years, the stock price doubled. The new CEO rode the Razr as long as possible, producing a dizzying variety in different colors and shapes and with slightly different features. The big carriers demanded it, says Zander, who currently sits on several boards: “Verizon would want the power button on one side, and AT&T would want it on the other.”

As the history shows the ups and down in the history curve of Motorola so here it comes again with arguably one of the worst decisions ever made by a major corporate CEO, Zander struck a deal with his Silicon Valley friend Steve Jobs, the CEO of Apple. Together their companies created a Motorola iTunes phone, the first phone connected to Apple’s music store. “We can’t think of a more natural partnership than this one with Apple,” Zander said at the time. Named the Rokr, the phone launched in the fall of 2005. Jobs, who introduced it, called it “an iPod Shuffle right on your phone.”

Zander says he believed that by working with Apple, Motorola could become cool again. But much as it had taught the Chinese to compete with it years before, Motorola was teaching one of the most creative, competitive, and consumer-savvy companies of all time how to make a phone.

Steve Jobs learned a lot from Motorola and on the backend Apple was working on a project. Two years later, when Jobs introduced the first iPhone, Zander’s Motorola was still pushing Razrs, pumping up sales by taking new variations further and further downmarket. The result: ever-lower profit margins. One analyst calculated that the company made, on average, only about $5 per device.

Partly because of the huge layoffs of recent years, Motorola’s innovation machine was stalling. The company had long numbered among the top 10 American firms registering U.S. patents, notes analyst Joan Lappin; by 2006 it dropped to No. 34.

When the iPhone did come out, it was an exclusive in the United States to AT&T. This left Verizon in an unenviable position. It was losing customers left and right to their main rival since it did not offer the iPhone. The solution that Verizon came up with was to leverage their excellent working relationship with Motorola to craft the Motorola Droid. It was positioned as the anti-iPhone. Almost a rise of the machines sort of marketing plan designed around productivity, talking of features that the iPhone in its infancy could not do at that point. Emphasizing the slide up keyboard in addition to having a large touch screen display. The device was boxy and felt like a tool, such a brash statement contrary to the minimalism of the iPhone.

And this concept worked! Even years later, the idea of referring to an Android phone as a “Droid” is still commonplace in the non-tech enthusiast crowd. This device was wildly successful, and it created a new loyal fan base for Motorola off of this Droid marketing. Motorola, stuck in its own old way of thinking of exclusivity contracts for devices, was overtaken by Samsung and its Galaxy range of Android devices. Samsung marketing the beautiful AMOLED screens and having the devices available on every major carrier allowed the South Korean company to become the default Android phone manufacturer to compete with Samsung.

Zander insists that he saw the smartphone onslaught coming but that Motorola “didn’t have the DNA or the people” to understand the software involved.

He also blames a less-than-speedy Motorola supplier that, he says, caused the company to miss nearly a year in the product cycle. “We should have just broken the contract” with the supplier, he says now. “The one regret I have is that I should have taken myself out of the CEO job and run the [phone] division [myself].”

Another mistake: Zander never engaged in China the way the Galvins had, leaving the details to his division heads and country managers. When China upped its networks to 3G, his managers pushed what they had—older 2G phones—at steep discounts in order to preserve market share, unbeknownst to the CEO. The collapse of the China business in 2007 left Zander dumbstruck. That year the South Korean company Samsung topped Motorola in phone sales for the first time, and it never looked back.

Zander’s poor performance pushed Motorola toward another sad rite of passage for many once-proud American companies: an incursion from Wall Street. In Motorola’s case, it came in the person of Carl Icahn, the man Fortune once called “the shrewdest investor on the planet.” Much of his $20 billion-plus fortune stems from his uncanny ability to see and exploit the untapped wealth inside companies that have weak leaders.

“Ed Zander was not a bad guy, but he was doing a terrible job,” says Icahn in a call from his vast offices overlooking New York City’s Central Park, where he first faced down the CEO. The company “unfortunately went downhill very fast.”

The activist investor had but guarded hope for Motorola’s phone division—“it’s a very tough and arcane business”—but he saw a great undervalued opportunity on the public safety side. So, in 2007, Icahn began snapping up Motorola shares. He eventually owned more than 6 percent of the company and fought to seat board members of his choosing. His goal: get the board to agree to break the company into parts in order to maximize its value to shareholders.

He succeeded. In 2008, Motorola set a course to split the phone division from the public safety and enterprise businesses. Zander, of course, was out. The reshaped board chose Greg Brown, who had run the latter business since 2003, as the new CEO.

A polished man with a calm baritone who sits on lots of boards (including that of the Federal Reserve Bank of Chicago), Brown had run the software firm Micromuse, so he had the necessary experience. He kept his corners of the company steadily profitable, maintained high margins, and had a quality that mattered greatly to Icahn: He could see the potential that Icahn saw.

But finding someone who could run the troubled phone business proved tough. “There were only a few people in the whole world who could do it,” Icahn says. “They all said no because they didn’t want to be anything but a CEO, and Motorola [already] had a CEO.”

The phone business would soon spin off anyway, Icahn reasoned. So he finally suggested that the board hire a co-CEO to work alongside Brown. Brown agreed to the arrangement. Sanjay Jha, a former Qualcomm COO who possessed a deep understanding of both the software and hardware sides of telecom, accepted the position. Jha’s package would ultimately net him close to $60 million over the next three years. Explains Icahn: “The board needed him.”

The Indian-born, U.K.-educated engineer walked into a marketing organization that seemed completely disconnected from what was happening in the market. “On my second day at Motorola in August 2008,” says Jha, “I did a portfolio review of all the company’s phones. I sat for three hours and looked at everything, flabbergasted. There were no smartphones.”

(

     Lack in innovation: Motorola was known to its innovations, but as comes to mobile phones, when the mobile phones getting popularity they didn’t focus on that at the right time. They didn’t do innovation at the right things at the right time. But later on they did innovate at some projects but they can’t compete at that moment. They work on irradium, they have made project almost $6B on that to send 66 satellite. so they have make the satellite phone but the cost of call was so expensive compare to other so failed. And later on they realize that people don’t just want satellite phone, as they sold it to military or police so the market size was small. Then finally when they tried to comeback they made a motorola razr. It was quite good, and the position as a fashion accessory, and they made a fortune on that at the beginning but later on because of low operating system and low software development, and not composed of other good features as compared to others available in the market. Then Nokia over take it, samsung, and then apple.

)

Jha called a meeting of the engineers to see how current they were. “I was told that Motorola actually developed and patented a lot of the stuff the company’s phones didn’t have,” he says. “The company was the first with a QWERTY keypad, with color screens, with 3G and touch.” But few Motorola phones had any of those features.

The only way to stop hemorrhaging money, Jha decided, was to slash both costs and the number of phones. At Motorola, 60 managers worked on dozens of different models. By contrast, Apple heaped all its genius into perfecting one phone. Jha figured he had one shot at saving the business: making a successful phone for Verizon, which was struggling to compete with AT&T, then the exclusive seller of the iPhone.

(Lack of vision)

Jha faced multiple challenges as expected. First Jha had to decide what operating system to bet on. Motorola’s five in-house systems didn’t make the cut; none were mature enough to rival the iPhone’s. Jha says that Steve Ballmer, CEO of Microsoft at the time, presumed that he would choose Windows Mobile. “Steve told me that… I ought to devote 400 engineers to a Windows Mobile phone,” he says. “I told him that Microsoft’s success wasn’t my priority. I needed first to survive and did not have the resources to put even one engineer on it.” (Ballmer could not be reached for comment by press time.)

The pressure was intense. Engineers told Jha—who was still commuting between his family’s home in San Diego and Motorola’s headquarters in Schaumburg—that they could not complete the new model before the spring of 2010. Verizon demanded a phone by October 2009. Meanwhile, his division was losing about $600 million a quarter.

Jha chopped 4,000 more jobs. The cuts devastated Motorola’s remaining pool of engineers. One star, Iqbal Arshad—who had extensive experience trying to get Nokia’s Symbian smartphone operating system onto Motorola’s phones overseas—was ready to quit. The pain of shutting his labs in Europe and firing his team had been too great. Jha convinced him to reconsider.

On a flight from Europe with Jha, Arshad prepared a presentation for executives back in Schaumburg. The plan, code-named Mission Impossible, was to build a phone on Google’s new Android operating system. It would be only the second such phone on the market.

The presentation, held in early 2009, grew heated. One top Motorola executive declared that choosing Android over Windows Mobile was madness. Google’s system wasn’t ready for prime time, he argued, whereas Microsoft was one of the most powerful software companies in the world.

Jha would not budge. Motorola’s board faced two options: go with Jha’s recommendation or shut down the mobile phone business altogether.

By a vote of 4 to 3, the board members chose the former. Quickly, Arshad handpicked a team of 200 in-house engineers to work closely with a Google team led by Andy Rubin, who had created the Android system. “They wanted Motorola to be successful and to prove everyone wrong,” says Arshad. “To save the company.”

Save it they did—for a while. The new phone, called the Droid (Verizon licensed the name from movie director George Lucas, who had coined it for Star Wars), hit the market in October 2009. In the Droid’s first few months, through the holiday season, Motorola shipped more of them than Apple shipped iPhones, Jha says. By late 2010, after four years of huge losses, the phone division was profitable again.

(Here we can observe one thing again, the inconsistency and the lack of long term planning, the lack of good leadership because the company wasn’t following a vision, instead the just make a ripple of revenue, they struggle only after periods to survive not to serve )

For longtime Motorolans, however, the success had to be bittersweet. Droid was not the kind of world-changing invention the company had been known for. Motorola had accepted that the most important innovations in phones were better aped than forged. It had latched its fortunes to a bigger, more powerful company and was surfing in its wake.

What’s more, Motorola had shown the world how to make a good Android phone. Soon the company’s old rivals, especially Samsung, were once again dwarfing it in the market. By the time Motorola split in January 2011—nearly three years after Icahn’s activism began and much later than the board had anticipated—buckets of red ink had spilled back onto the phone division’s balance sheet.

(

Slow rate of adoption: Motorola was very slow to adopt the innovation and technology. First they lack in software, they even didn’t adopt to new technology. As 3G some, Motorola didn’t use that technology, they work on wireless communication but didn’t launch 3G phone. As Motorola was related to telecom so their customers didn’t show the need to 3G phone but in actual their customer’s customers needs 3G phones. They should have focus on end users but they didn’t. And when google launches its Android, all the other companies adopted Google’s android. They thought they should focus on hardware and let the google do their work so they all leaves the android development on google and by focusing on hardware compatible to android they make their phones great in terms of easy to use and attractive with designs and features but in case of Motorola, they said they would develop their own hardware and software and they couldn’t do better even in one side and lost the company. Samsung is the largest due to android use. They just focus on hardware instead of both.  Motrola didn’t even use the goggle software nor prepared their own operating system and they eventually lose the battle. 

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A couple of months after the cleaving of Motorola Mobility (the mobile phone company) from Motorola Solutions (the public safety and enterprise company), Google began overtures to buy the former. Sure, phone-making ability was one attraction; Google was easing into the hardware business. But the more valuable prize was Motorola Mobility’s portfolio of about 17,000 patents, largely created in the old days of feverish innovation. That intellectual property would make it easier for Google to defend itself against the spate of patent lawsuits that perpetually looms over the telecom sector.

For Icahn, Brown, Jha, and Motorola Mobility’s shareholders, the deal—announced in August 2011—was vindication of the wisdom of the split. It was also financial deliverance. The guys from Silicon Valley offered $40 per share, a 63 percent premium over the market price for Motorola Mobility stock at the time. The total cost: $12.5 billion. Google took possession in May 2012, announcing on its website that “we plan to run Motorola as a separately operated business.”

Jha left immediately. (He became CEO of semiconductor maker GlobalFoundries.) Google chief Larry Page replaced him with Dennis Woodside, a triathlete who had been Google’s head of sales and operations in the Americas. Woodside was quoted calling Motorola “the Google of its day”—a painful reminder to some in Libertyville that Motorola’s “day” was long ago.

Woodside brought in a nearly clean slate of execs, many from Silicon Valley. They decided to build those hip Mart headquarters, to close one-third of Mobility’s remaining offices, and to make another brutal round of job cuts. Eliminating 17,000 more workers left Mobility with a mere 3,600 worldwide. About 600 of them, including Osterloh and almost all the other top executives, are based in Sunnyvale, California, just down the road from the Googleplex.

New top software engineer Steve Horowitz, who had worked on Google’s original Android team, held strong views on what was wrong with most Android phones. For one thing, most were too customized: Virtually every phone maker and every carrier “skinned” the operating system to give it a branded feel and loaded on their own apps. “I didn’t like that,” says Horowitz. “I knew Android and the code team that built it, and they made really good code. I wanted to go back to pure Android.”

Motorola Mobility’s first phone developed under Google ownership, the Moto X, appeared in August 2013. It mostly wowed reviewers for all the reasons its creators had hoped, including sleeker design and software that did not try to suck users into superfluous proprietary services and content. You could control the phone by voice without touching it—a major innovation. Sensors could even pick up on whether you were driving and then switch automatically to touchless control. Multiple microphones helped filter out background noise as you talked or shot video. Even seven months after Moto’s launch, “the true defining features of the phone are still unique and make the phone stand out among a slew of other Androids,” said the review site PhoneDog.

Motorola and Google by extension felt the need for something new that would revitalize the once dominant brand into doing something different. The Moto X on the surface seemed like just another Android device but Google and Motorola really aimed to do something unique and different than what was in the market. The solution that the company’s collective brain trust came up with was through two avenues: software and customization. The Moto X took some less than stellar specifications for the time and made it as efficient as possible with a streamlined and clean version of Android. This was expected coming from the Google Nexus program. What really made the Moto X such a fascinating device was the introduction of Moto Maker.

(

They were hardware company, even manufacturing the ICS and embedded systems but didn’t focus on software, and actually they didn’t realize the world is changing fast. At the beginning the company who makes best hardware gets the highest market share, but as the world changes, people tend to shift towards software, so the demands of hardware shrinks, the hardware works only for software, not just hardware. User experience started depending on software. And there they lose the fight. When the software starts, the companies stated differentiating based on software, and they can’t start working timely on software. Screen sizes were different, and slider based mobiles, and all type of different hardware needs different software so it needs a good investment and they didn’t do that and lacks behind).

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Moto Maker was the customization tool on Motorola’s website where the possibilities were almost endless in the personalization of the looks of a device. Device color options with multiple finishes, button color choices, custom engravings, and matching accessories. This was in an era of smartphones that were all black and gray slabs. This was different, a breath of fresh air. Very reminiscent of Apple when they released the iMac G3 with multiple colorful finishes in a sea of gray Windows laptops, this tool was very popular and really mirrored what Android is really all about. Android marketing campaigns over the years have emphasized the personalization capability of the platform, and this approach really was a reflection of that.

The device was applauded and praised. Motorola was back. The subsequent devices in the Motorola lineup continued this spirit of customization. In addition to this, features like Moto Actions with intuitive gestures to launch the camera and flashlight were introduced to great fanfare. On top of this, Motorola phones were among the first to get updated to new versions of the Android software alongside the Google Nexus phones. So at that point in time, for a couple of years, Motorola was the next best thing to getting a Nexus device. All of this seemed to be the long term plan for Google as they finally had a great hardware maker making devices fully tailored to their software.

Nevertheless, initial sales were slower than the company had hoped. So it cut prices by about 25 percent. You can now buy a Moto X for $299—$300 less than Samsung’s top-tier phone. Or you can choose one of the two lower-priced phones Mobility introduced in the past year, the $179 Moto G and the $129 Moto E. They sold well in India and Brazil, luring buyers who once could afford only basic “nonsmart” phones.

But Osterloh says that the company must drive prices down still further. That, of course, would increase pressure on profit margins. Reducing margins on consumer electronics, phones in particular, had been a recipe for disaster under Motorola Mobility’s previous masters.

(

They focused on cutting margins instead giving them the value, Nothing is ever cheaper or expensive rather it’s the value you provide in return, they think the obvious instead of going deep, a delebrate thinking and came a good solution of providing a value in return.

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Even mighty Samsung’s profits are shrinking—pressured, in part, by the Moto phones. Only Chinese companies seem to have figured out how to grow while driving down margins. Remember, Google’s Motorola Mobility division is still losing money: $68 million in the last quarter. Then in 2014, Google decided to execute a Google move.

Those losses no doubt factored into Larry Page’s recent decision to sell Mobility to Beijing-based Lenovo, the world’s biggest computer maker, for a relative song. The $2.9 billion deal struck by Yang Yuanqing is less than a quarter of what Google had paid 20 months before. (One reason for the low price: Google is keeping the patents and a skunkworks of “advanced technology” engineers in California.) The purchase will give Lenovo—which sells enough low-priced Androids in China to make it the world’s No. 4 mobile phone maker—access to the U.S. market for the first time.

Lenovo Executives say that the two companies complement each other well. The purchase will wed Lenovo’s huge economies of scale to Motorola Mobility’s brand name and market share outside China. Lenovo will also reap the benefit of a slate of innovative new products that Mobility is about to launch, says the Google team, though it won’t talk details. That’s in addition to a new Moto model and a highly anticipated Android wristwatch, the Moto 360, both of which will likely launch within the next couple of months.

Those products may give Yang some executive luck. He may need it, given his ambitious prediction that Lenovo will make the Mobility business profitable in 12 to 18 months.

There was and remains to be a lot of questions about Lenovo as a smartphone company. They had some phone presence in their home country of China, but seemed to lag behind the giants in the country like Huawei, Xiaomi, Oppo, and ZTE. The Motorola acquisition was a way to leverage a once great brand to create some North American success. The device that was the real manifestation of the Lenovo owned Motorola was the Moto Z. A device that seemed very exciting not due to the device itself but of the accessory ecosystem that was being pitched with it.

The original Moto Z had magnetic pins on the rear of the device, where these new Moto Mods could be attached to add functionality. A zoom camera lens, a boombox speaker, extended life battery, and even a projector. This was a call back to the productivity days of Motorola. The reliability of the strong hardware prowess of the Chicago roots of the company. The relationship with Verizon was rebuilt and the Droid branding was revived. The consequence of this was that the whole appeal of a Motorola phone was just the Mods at this point. Which had an incredibly high cost of entry. Most of the Mods that people wanted to use with this phone started at $100 each and went up to $350. Getting all of these Mods together with the phone drove the investment up to the $1500 range. Which was a cost that 4 years ago, no one wanted to pay.

In addition to the higher cost of ownership, the track record of updates in a quick fashion was now gone. Lenovo had proven to not prioritize Android updates. The hallmark software features that were championed with the Moto X had been left dormant and Lenovo had not improved upon them at all. While the hardware was still there, a commitment to supporting the modular dream of the Z line had stopped Motorola from being relevant to modern smartphone design trends. There was no excitement around Motorola. They had fallen behind in an excitement sense to Apple, Samsung, Google, OnePlus, and LG. The Motorola flagship is now effectively dead due to this rapid shift in focus and lack of identity over the shift in ownership priorities.

Despite the multiple blunders in the flagship space, there have been some silver lining to this whole debacle of ownership hot potato with Motorola. This has been the sheer dominance that the company has experienced at the entry level and lower midrange segments of the Android ecosystem. The Moto E and G lineups have been the de facto recommendations for people looking for a functional smartphone experience for under $250. At this price bracket, more forgiveness is allowed for a lack of software updates. Lenovo has seen this, and as a result has made their focus on the lower end of the market. In the United States, this is not what gains the accolades. It is however, what makes a company successful in markets like Brazil where Motorola still has excellent brand loyalty. As a result, Motorola has shifted to focusing on regions where its name still carries weight and the target customer is centered on budget friendly devices.

There is a chronic lack of vision around Motorola devices these days. The transition to ownership under Lenovo has been erratic at best. The flagship play with the Moto Z and Moto Mods has failed yet they continue to make Moto Z phones, with the Z4 from last year being the latest example. For a brief period, the company tried to leverage Android One for software but stopped releasing devices with regularity unlike what HMD Global has done with the Nokia brand.( still has a consistency problem). Then the company indicated a pivot to the lower end of the market. This seems to be the path for a while, but now they have tried to re-enter the ultra flagship tier with the very disappointing Moto Razr foldable phone.

Right now, Motorola is a brand without an identity. A brand in desperate need of a renaissance. A company that has lost its way due to poor ownership and a victim of companies that are focused on their own agendas. There is no hallmark feature of Motorola phones at this moment outside of price on their lower end models. Even companies that are struggling have some level of identity. LG is renowned as the audio solution phone with its headphone jack prowess. Google is the still camera king. OnePlus is the best performance bang for your buck. How can Motorola ever come back from this?

Motorola at its absolute best was during the Razr days. A design icon that was bold. Going back to this is important to create a buzz around the brand. They have started to do this with the Razr folding phone, from a hardware and design perspective. Motorola was known for sharp lines, metal unibody designs. A device that feels aggressive, feels like a great piece of technology. This has to be the design change as the new Moto G phones, Motorola’s most important device, just feel like something from the Samsung Galaxy A series catalog. This is not Motorola. Secondly, there needs to be some sort of software differentiation from the company.

As it stands currently, the software feels like the rotting remnants of the original software on the Moto X. Integrating with modern solutions such as PC’s and adding more support for some level of a whole home ecosystem is crucial. LG, OnePlus, Google, and Samsung have all made modern improvisations to their software delivery. If that is too much to handle, then taking the Nokia route and going all in on Android One needs to be the route taken. What cannot happen, is to have a languishing semi Pixel-like experience that never seems to be updated. At this point in time, being a cookie cutter manufacturer will not cut it.

Motorola is one of the last great brands that is still alive. Palm no longer exists. BlackBerry is dead by all accounts. Nokia is being revived but has had some stumbles. Motorola is the last one left. We would not be where we are today in this industry without Motorola. This company going down the road to irrelevance is not how this company should end. We need an interesting Motorola. We need more competition and unique ideas. We should all want Motorola to make a proper comeback and get away from being just another Android company trying to be like Samsung

How has he managed this? For one thing, Solutions’s customers are institutions, so the company remains largely immune from the race-to-the-bottom pricing of the consumer market. Another plus is that Solution’s business model resembles Apple’s. That is, the more a customer buys, the more that customer is bound to the company’s ecosystem of products and services. Solutions currently dominates the U.S. market for emergency communications equipment, by most estimates. (In March, the McClatchy newspapers ran a series of articles suggesting that Solutions’s practices are anticompetitive. In mid-July, three House Democrats, including Henry Waxman, sent a letter to the Department of Homeland Security’s inspector general, asking him to investigate.)

Brown’s main push these days is to develop the very thing with which the old Motorola had so mightily struggled: Software. Specifically, advanced software that could dramatically improve how safety officers do their jobs. Imagine a jacket-mounted camera that turns on whenever a cop pulls a gun from his or her holster, beaming the images back to police headquarters. Or Google Glass–like spectacles that give officers data—maps, feeds from nearby security cameras—in real time. Or sensors that can automatically detect gunfire in a neighborhood and dispatch patrols before anyone calls 911.

It’s cool stuff. So perhaps it’s fitting that Brown has placed 200 salespeople, engineers, and creatives not in sleepy Schaumburg but in the old Railway Exchange Building at 224 South Michigan Avenue. The tower’s huge new Motorola Solutions sign shines over Grant Park. And if the company decides to move more people from the burbs to the city, who knows? A certain familiar occupant of the Merchandise Mart may wind up with some extra office space to sublet.