Assignment

(MT414)
Strategic Management

Submitted by: Submitted to:

Ashish Purohit Mrs. Purvi Mathur
MBA/25010/19
LIQUIDATION STRATEGY
MOTOROLA

DEFINE-The Liquidation Strategy is the most

unpleasant strategy adopted by the organization that includes selling off
its assets and the final closure or winding up of the business operations.
Business becoming unprofitable.

History of company-Motorola started in Chicago, Illinois, as Galvin

Manufacturing Corporation (at 847 West Harrison Street) in 1928 when
brothers Paul V. and Joseph E. Galvin purchased the bankrupt Stewart Battery
Company's battery-eliminator plans and manufacturing equipment at auction for
$750. Galvin Manufacturing Corporation set up shop in a small section of a rented
building. The company had $565 in working capital and five employees.

In 2004 it got national award for technology

In 2011 got separated as

 Motorola solution and Motorola Mobility

In its earlier stages Motorola was considered as biggest mobile phone manufacturer
and had market share of about 25% it was ranked 23rd in forbes 500 best private
companies list with revenues of $22 billion and profits of nearly $2 billion.
Soon Nokia came into market and overtook Motorola as biggest player of mobile
phones beating Motorola. In July 2007, Motorola Inc. (Motorola), a major
communications company based in the US, announced its financial results for the
second quarter of 2007. The company reported a loss of $28 million 4 on sales of
$8.7 billion in the quarter, compared to a profit of $1.3 billion on sales of $10.8
billion in the corresponding quarter of 2006.5 Motorola blamed the disappointing
results on the poor performance of its biggest business unit - Mobile Devices -
where sales had fallen by 40 percent to $4.3 billion. In the second quarter of 2007,
Motorola had shipped 35.5 million mobile handsets.8 In contrast, Finland-based
Nokia Corporation (Nokia) had shipped 100.8 million handsets (an increase of 29
percent over the corresponding quarter of the previous year).9 As of the second
quarter of 2007, Nokia was the leader in the global mobile phone industry, with a
market share of 38.0 percent.

Since Motorola failed to cop up with changing trends and technology it announced
its liquidation and google bought Motorola.
Benefits of the deal

 Google and Motorola Mobility together will accelerate innovation and

choice in mobile computing. Consumers will get better phones at lower
prices.
 Motorola Mobility’s patent portfolio will help protect the Android
ecosystem. Android, which is open-source software, is vital to competition
in the mobile device space, ensuring hardware manufacturers, mobile phone
carriers, applications developers and consumers all have choice.

Why Motorola Mobility?

 Motorola Mobility’s full commitment to the Android operating system
means there is a natural fit between our companies.
o Motorola Mobility was a founding member of the Open Handset
Alliance in 2007.
o Motorola Mobility in 2008 made a big bet on Android as the sole
operating system for all its smartphone devices.
 Google is great at software; Motorola Mobility is great at devices. The
combination of the two makes sense and will enable faster innovation.
 Motorola Mobility has a long history of innovation in communications
technology and the development of intellectual property.
 Its many industry milestones include the introduction of the world’s first
portable cell phone nearly 30 years ago, and the StarTAC–the smallest and
lightest phone in the world when it was launched.

The idea was that the patents would help the company with legal protection for its
widely used Android software for smartphones and tablet computers against
competitors such as Apple , BlackBerry , and Nokia which was acquired by
Microsoft last year. Google had always kept Motorola’s hardware business at
arm’s length, in order to avoid the risk of alienating other mobile device makers
that rely on Android.
Motorola Mobility’s first phone developed under Google ownership, the Moto X,
appeared in August 2013.

Later came Moto G and Moto E which were priced at much lesser price to
compete with its rivals like Samsung in lower end mobile phones.

Fig. Moto X Fig. Moto G Fig. Moto E

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.

Soon it was noticed Google’s Motorola Mobility division is still losing money:
$68 million in the last quarter.

Motorola was always an odd acquisition for Google; more than a year after the
deal closed, analysts were still ―scratching their heads‖ about what Google could
have been thinking. It put Google in the awkward position of owning a company
that competed with all of the other makers of Android smartphones.
And margins in that business are brutal—after years of competition, they’re down
to 2% to 3%.

It’s clear that it’s always wanted to sell its Motorola-branded Android phones at
the cheapest possible price, to get more people on Android, where they’ll use
Google’s services, which is how Google actually makes money.

Some investors and market participants saw this as a low price. This is because
Google had initially bought Motorola Mobility for $12.5 billion in 2012.

Google didn’t take a loss from the divestiture. Firstly, at the time of the acquisition,
Motorola had no debt and $3 billion of cash on its balance sheet that Google got to
keep. Google then sold off Motorola’s cable set top box business to a private
equity firm for $2.3 billion. This means that the actual loss for Google would be
$4.3 billion after its sale to Lenovo.

According to the deal with Lenovo, Google will keep the majority of Motorola’s
huge patent portfolio. The company had valued those patents and other developed
technology at $5.5 billion, according to a regulatory filing last year. So in terms of
valuation, a $2.9 billion sale to Lenovo doesn’t seem bad at all.

The deal will help Google get rid of the financial headache that has plagued the
company since the time it bought Motorola. Motorola has lost nearly $2 billion
since Google took over while trimming its workforce from 20,000 to 3,800. The
sale would also help Google focus its time and resources on the Android mobile
operating system software and the new wave of smart devices.
 .

LEARNINGS
QUESTION 1- Reason why Motorola failed in the first phase ?

Answer- Following are the reason why Motorola failed to sustain in the market
1. Motorola missed the movement to 3G. Sure, it did — but remember its
biggest customers, the U.S. wireless carriers, didn't think they wanted 3G.
So Motorola listened to its customers, when they should have been listening
to its customers' customers.

2. Motorola was a stodgy Midwest company in a fast paced Silicon Valley

world- Apple understands design; Motorola doesn't.

3. Motorola should have moved into conten- Motorola led in set top boxes
and IPTV. It should have jumped all over Tivo/Slingshot. It made a great
acquisition with Symbol —and it understood content, but didn't carry the
day.

4. Motorola stopped innovating.

5. Motorola didn't execut-Its customers — The wireless carriers — had a

hate-hate relationship with Motorola.

6. Motorola never had the sense of urgency-Its rivals moved with fast pace ;
Motorola jogged at its own pace which showed its overconfidence.
QUESTION 2- What Made google buy Motorola ?

Answer 2- Google foreseen the future of android mobile phone market and
took this step in order to stand stronger in the smartphone industry and the
growing technology. The main reasons are listed as follows

1. Motorola Mobility’s patent portfolio will help protect the Android

ecosystem. Android, which is open-source software, is vital to
competition in the mobile device space, ensuring hardware
manufacturers, mobile phone carriers, applications developers and
consumers all have choice.
2. Motorola Mobility’s full commitment to the Android operating system
means there is a natural fit between our companies.
3. Motorola Mobility was a founding member of the Open Handset
Alliance in 2007.
4. Motorola Mobility in 2008 made a big bet on Android as the sole
operating system for all its smartphone devices.
5. Google is great at software; Motorola Mobility is great at devices. The
combination of the two makes sense and will enable faster innovation.
6. Motorola Mobility has a long history of innovation in
communications technology and the development of intellectual
property.
7. Google never ran Motorola with an eye toward profit.

So basically Google’s main aim behind acquiring google was to get hold to
the various patents held by Motorola so that it gets saved from legal issue of
open android world and to compete with its rivals like Apple and Samsung.
 QUESTION 3- How google effectively used Liquidation strategy while
selling Motorola to chinese mobile company Lenovo ?

ANSWER- Google bought Motorola for 12.5$ billion and sold it to at a

mere price of 2.91$ billion to Lenovo.

Motorola was always an odd acquisition for Google; more than a year after
the deal closed, analysts were still ―scratching their heads‖ about what Google
could have been thinking. It put Google in the awkward position of owning a
company that competed with all of the other makers of Android smartphones.

Motorola has lost money for Google—hundreds of millions of dollars—every

quarter it’s been on Google’s balance sheet

Firstly, at the time of the acquisition, Motorola had no debt and $3 billion of cash
on its balance sheet that Google got to keep. Google then sold off Motorola’s
cable set top box business to a private equity firm for $2.3 billion. This means
that the actual loss for Google would be $4.3 billion after its sale to Lenovo.

While making a deal with Lenovo Google kept all the rights of the majority of
Motorola’s huge patent portfolio which valued 5.5$ Billion therefore it means
Google faced loss of only 2.9$ Billion

Therefore while facing regular losses because of Motorola Google took right step
at right for selling it to Lenovo and making a fair deal which helped Google to
attain its reputed position in the market and compete with rivals like Apple and
Samsung.

In this way Google used the liquidation effectively in order to gain business
benefits.
 CASE STUDY SUMMARY

This case study shows how Motorola went through liquidation in different stages
and ultimately how Google used Liquidation strategy in order to attain a better
place in the market and compete with its competitors in the android operating
system environment without the fear of legal boundaries.