Motorola: The new CEO's real challenge

Roger O. Crockett and Olga Kharif
11 Aug 2008

There's no question what Wall Street thinks about Motorola's (MOT) new co-chief executive, Sanjay Jha. The communications conglomerate's shares jumped 11% to nearly $10 on Aug. 4 after announcing the former Qualcomm (QCOM) chief operating officer would take the reins of Motorola's mobile-phone business. Jha brings loads of industry experience and extensive familiarity with wireless investors, ending the Schaumburg (Ill.) company's five-month search for an executive to head the troubled cell-phone unit. 'He is the perfect guy for Motorola,' says Mark McKechnie, an analyst with American Technology Research, who worked at Motorola years ago. 'If anyone can turn this handset division around, it's Sanjay Jha.'

Still, for all of Jha's experience, he faces one huge challenge: Motorola's corporate culture. For the cell-phone unit to recover, Jha will have to fully cleanse Motorola of its sluggish, bureaucratic ways and teach a company that has long let engineers drive product development to think more like marketers, in tune with consumer tastes. It's a challenge that has proved insurmountable for several top Motorola executives.

Jha will take over the mobile-phone unit immediately. He will act as co-CEO with the current top executive, Greg Brown, until the mobile-phone business is spun out as a separate company. That move is expected to be completed in the third quarter of 2009.

Getting connected with the market

Motorola's history is marred by marketing missteps. When the industry shifted from analog phones to digital in the mid-1990s, executives and engineers at Motorola underestimated the significance of the shift, stumbled in introducing digital phones, and then lost their lead in the market to a Finnish upstart called Nokia (NOK). Then as the pace of product cycles quickened in recent years, Motorola's plodding culture contributed to its inability to deliver new phones to market as quickly as competitors.

Every CEO who has run the company since Gary Tooker took over in 1993 has attempted to infuse the company with more entrepreneurial DNA. Under Edward Zander, who left in December, Motorola managed to hasten the production of a new slim phone, which became the spectacularly successful Razr. But leadership could not keep pace when consumers turned their attention away from hardware to an increasing focus on the software that bestows new functionality on phones. Motorola also fell behind as the industry shifted to so-called 3G phones, optimized to surf the Internet and handle multimedia such as music and video. Jha's daunting task: Keep the troops in better touch with the market and 'get new products to market quickly,' says Richard Windsor, an analyst with Nomura.

Jha, an engineer by training, sounds hesitant to overhaul the company's deep-rooted engineering culture, however. 'I think the engineering culture is a tremendous asset to Motorola,' he told BusinessWeek in an interview. 'I think the challenge is to make that culture stay in tune with the marketplace. When it's a problem is when it gets disconnected with the marketplace. And my job is to keep it connected.' Jha says he'll take 90 days to assess the situation before making any final decisions.

Innovation insight

Jha has plenty of motivation to tackle the challenge. His base salary is no less than $1.2 million. He will receive 3.7 million restricted Motorola shares, worth approximately $35 million at the Aug. 4 stock price. He also receives loads of stock options.

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