The rumors of a Motorola dismemberment plan have sprung anew with a Wednesday article in the WSJ.  Everyone, get your axes ready – either to grind or to hack off your favorite piece of the Moto beast.  The latest round of speculation points to the possibility of Motorola combining their handset and set top box divisions to build a new integrated future. Of course, speculation also exists pointing to the potential spin-off of these units.  Who are all these unnamed speculators anyway?  Whether it is to sell them off or create competitive advantage, the merger of the two units raises some interesting prospects.

If Motorola can come up with a workable structure to blend its mobile device unit with its set top box unit, then that new combined group would hold tremendous promise to integrate consumers’ digital media in an exciting way.  That combination would certainly attract the interests of companies like Huawei, Asus and others looking to gain more prominent market positioning in the mobile and CE industries.  Of course, if Motorola could do that easily, it wouldn’t be looking to dismantle itself and sell off the valuable morsels to the highest bidder.  So while I think the combination of the two units is a fine notion at a high level, the fact remains that Motorola has failed to integrate its two most important business groups in any significant way and will have to undergo major cultural and organizational changes to realize that vision. Back in early 2007, I met with then CMO of Motorola, Casey Keller, at a trade show to discuss media integration and device interaction between mobile handsets and set top boxes.  Keller shared the view that Motorola held the strongest potential hand in the business to do that, but was facing an anemic mobile device pipeline (how many ways can you sell a RAZR, after all?) and new levels of challenge on the set top box side as well.  So, vision took a back seat to triage and the more important task of stopping the bleeding, but execution proved to be elusive.  From YE 2006 to YE 2009, Motorola’s annual device sales dropped by approximately 65%.

Three years later, the Motorola device group is showing solid signs of rebirth with its recent line-up of smartphones architected around the Android platform.  The new expanding portfolio leverages Motorola’s greatest recent advance: the highly customized Motoblur experience that presents users with all their social networking and primary apps in a single view.  If this concept catches fire, it provides an interesting potential roadmap for Motorola to upgrade its set top box experience to include similar capabilities for social networking but, perhaps more importantly, media sharing among a consumer’s multiple devices.  With its massive share of the North American set top box market, Motorola holds a unique hand of assets and partners.  Cable companies have been desperate to extend their relevance beyond the TV and laptop and a set top box that easily interacts with mobile and CE devices, integrating digital media could be just the trick.

But the window of opportunity for this integrated approach is limited, so, Motorola, god speed. As Jeff Goldblum famously said in Jurassic Park, “Life, uh, finds a way.” In the consumer media world “life” is the idea of acquiring, enjoying and moving media on any device you want, whenever and anywhere you want.  Consumers are already experimenting with this in many forms.  Whether it is the game station, laptop, media gateway, transcoders, mobile apps, etc, consumers have a huge selection of ways to get media from A to B, but few are terribly satisfying from either a user interface or device compatibility basis.  This leaves Motorola with some wiggle room to merge the set top box business and mobile device unit to generate a new integrated vision of consumer media.  The vision will need to be both technical and cultural to bridge the gaps between the two business units, which share nothing beyond a company brand.  But with proper execution, such an approach could save set top boxes and the Motorola brand from being another set of fossils on the anywhere evolutionary path.

Big international trade shows produce a lot of hype, bluster and, when the timing is right, some fairly surprising experiences.  Over the past 10 years that I’ve attended these shows I have seen tremendous progress in device design, throughput capacity, application creativity, the “emergence” of application stores again (“Ladies and Gentlemen, Now for the THIRD TIME, a company claiming to be the first to offer an innovative apps store!!!), and true change in the power of mobility.  I find the experience of attending these shows a funny mix. Mobile World Congress, CES and CTIA are equal parts brutal scheduling, humdrum corporate decks, mental gymnastics of dealing with information overload, regret for having never picked up an amphetamine habit and actual excitement in seeing unusual and unexpected products and events.  

My worst ever trade show surprise was the completely unexpected and extremely unwelcome explosion of a toilet I happened to be using at a trade show in Amsterdam.  True story.  I guess the Dutch still don’t have a total handle on the whole reclaiming-the-land-from-the-sea routine.  On the better end of the “surprise” spectrum, however, last night’s Nokia party produced a real gem.  

In the middle of circus girls climbing impossibly high pieces of fabric to do death defying acrobatics, Nokia’s powerful EVP of Markets, Anssi Vanjoki, took the stage to welcome everyone to evening’s festivities.  What came next was one of those moments that jars your brain and commands that you pay close attention. Vanjoki talked about the long history of Nokia coming to this event and hosting this celebratory party and then came the kicker: Vanjoki announced that Qualcomm’s CEO Paul Jacobs was at the party to help celebrate the recent announcement that the two behemoths would be working together on a new device destined for the US market.  And sure enough there Jacobs was, laughing, socializing, drinking his Cava.  As Vanjoki relinquished the stage to the infinitely more flexible Spanish circus girls, he made his way over to Jacobs and the two had a bit of a hug. A hug!  Now before any of the teams of lawyers rush to include me on their future deposition lists, let me confess that my view was somewhat obscured by many people equally astounded by the turn of events, possibly affected by my surprise at the whole thing and potentially altered by that damn Cava, but I’m sticking by my interpretation of the events.

Now, you’re probably wondering, “What does all this mean?”  Well, as you can imagine, I immediately put in an order for several cases of that particularly delicious and effective Cava.  But more to the point of a professional blog, ahem, the hug was a public display, not so much of love, but a rather a thawing of the previously icy and often adversarial relationship that has existed between these two market leaders for some time.  After years of litigation and public relations battles over intellectual property concerns, royalty payments and ecosystem positioning, this agreement to work together on developing a device for the US market is a small initiative for global giants.  But with operators and other parts of the ecosystem yearning for a pathway to lower the total cost of ownership of mobility, a more cooperative relationship between Nokia and Qualcomm could have a significant impact on the costs and dynamics of devices and their distribution in both mature markets like the US and the EU and in high-growth emerging markets. Vive la fraternité!

I’ll confess it: I love a good comeback story.  As a lifelong San Diego Chargers fan, I guess that comes with the territory.  So with the Chargers’ great win over the Colts last weekend I was in just the right mood to see some of the better turn around stories here at the mammoth Consumer Electronics Show (CES) in Las Vegas.  

First on the list (more stories to come) is Palm and its fabulous new Pre mobile device.  After several years of miserable market share performance and middle-of-the-road products, Palm has pulled a small gem out of their hat.  The Pre is a tight combination of exciting user interface, form and function that will essentially close the UI gap with Apple’s iPhone and Google’s Android.  The new Palm UI is beautifully rendered, very intuitive and quickly executed with the help of its Texas Instruments processor.  With its slide-out QWERTY, the Pre smartly avoids the pitfalls of touch-screen-only devices, namely that it is damn hard to quickly and accurately write emails and documents without a lot of silly fumbling.  For those touch-screen fans with tiny, pointy fingers, hurray for you–but for the rest of us, the move to combine multiple input approaches is a blessing.  Now I can stop filing my thumbnails down to a point!

Handling and navigating multiple applications is a relative breeze compared to many leading smartphones, and the cross application integration is well designed with what Palm likens to shifting through a deck of cards.  Once I stopped trying to go back through a tedious menu approach like I have with other devices, I quickly warmed to the deck of cards layout approach.  Searching for names and content quickly pulls up locally stored data and content and, if you don’t have it on your device, the Pre will prompt you for Google and Wikipedia web searches to find it.  The Linux-based OS is designed to allow for the quick development of third-party applications which will greatly speed the availability of add-ons for the Pre.  Taking all this into account, if Palm can stage a comeback and generate market share growth, this device is their equivalent to the Chargers’ Darren Spoles – a tiny powerhouse that will surprise you with its dexterity, speed and multi-purpose performance.

But design is only one part of the battle for Palm in its efforts to resuscitate its market positioning.  The larger challenge will be whether Palm has the ability to convince operators around the globe that they have the commitment and financial strength to ensure that the Pre gets the marketing muscle, price point and distribution it needs to be worth the effort.  To accomplish this feat the folks at Palm will need to apply their creative juices to redesigning how their device will play in the Bermuda triangle of Operators, Retailers and larger OEMs.  

In order to accomplish this difficult task Palm must focus its efforts on keeping the price point under $250 while providing major retailers with sizeable marketing support and developing a new program of attractive and separate financing.  The financing will give retailers the ability to make money while enabling consumers to purchase the device subsidy-free with affordable monthly payments.  Operators around the globe are quickly realizing that the Apple iPhone subsidy model may generate sales but, more importantly, degrades their profitability and shifts too much brand equity to the OEM.  Palm no longer has the financial strength or brand strength to follow Apple’s lead here, so they must do everything they can to ensure the Pre generates both buzz AND profits.  This combination will endear them to operators and deliver on the strong promise of their Pre.  While the odds of this happening might look a lot like the spread Vegas bookies are giving the Chargers to win the Super Bowl, Palm finally has the goods to at least be in the game.

In this Yankee Group podcast, Andy Castonguay, Josh Martin, Josh Holbrook, and Jeffrey Breen discuss the difficulties of giving handsets for the holidays.

handsets podcast (mp3 / 6.4MB / 06:48)

In this podcast, Yankee Group’s device expert Andy Castonguay argues that while device manufacturers and mobile carriers share in the rewards of exclusive handset arrangements, the bulk of the risk is borne by the carrier: “great for Apple, terrible for AT&T.”

Josh Martin, Josh Holbrook, and Jeffrey Breen join Andy in this discussion of carrier subsidies and consumer buying trends in the context of the current economic downturn.

OEMs win, carriers lose podcast (mp3 / 10.5MB / 11:24)