By Kenton Williston and Seth Benton Courtesy of EE Times (03/31/2008 10:07 AM EST)

BUFFALO, N.Y. — The news that Motorola Inc. is spinning off its handset business made us wistfully nostalgic. As electrical engineers, we have been inspired by the company's phones, which included the first commercial cell phone and the game-changing StarTAC and Razr. Motorola assumed the corporate persona of the pioneering hero, blazing a path for a fledgling industry.

In the past few years, though, the hero has become doddering and confused. As the industry moved beyond the Razr with innovative designs like the iPhone, Motorola kept firing off Razr variants, such as the Krzr and Rizr, overusing the letter "Z" like a geezer donning hip hop gear to keep it fresh with the kids.

So what went wrong? Why did the Razr's disruptive successor never arrive? Some have pointed to the untimely death of the man behind the Razr. But more important than any one person has been the fact that Moto is fundamentally an engineering company, not a consumer design company.

Motorola has always had world-class electronics engineering. That was a big plus in the early days, when technological advantages let Moto deliver unique products. Twenty years ago, Motorola had few competitors because building a cell phone was a huge engineering problem.

These days, cellular technology is largely commoditized. Lots of companies build phones, including many that have little knowledge of the underlying technology. Today, differentiation comes from consumer design: Does the phone look cool? How good is the user interface? And so on.

"Let's face it: Any handset manufacturer has access to the same basic underlying technology," said Frank Dickson of market research firm MultiMedia Inelligence. "Where I think you're seeing a lot of differentiation is clearly in software."

Motorola's weakness in consumer design was most apparent when it collaborated with Cingular and Apple on the ill-fated Rokr. The three companies reportedly argued over pretty much everything, from how much music the device could store to how songs would be loaded and how the companies respective logos would be placed.

The resulting phone was functionally broken: It could hold only 100 songs, and it couldn't download songs directly from the Web. It was so hard to use that Steve Jobs himself had trouble demonstrating it. It was also ugly—surely not Apple's contribution. If Motorola and Cingular had leveraged Apple's design expertise instead of fighting it, maybe Apple wouldn't be eating Moto's high-end lunch.

Indeed, a peek inside the iPhone reveals the importance of emphasizing consumer design over silicon superiority. There is nothing special about the iPhone chips; in fact, the first-generation iPhone doesn't even support 3G. Rather, the iPhone is special because of its sleek industrial design and its intuitive user interface. Or, as the title of a panel discussion at this year's Mobile World Congress bluntly put it, "It's the User Experience, Stupid."

Despite Moto's struggles, it would be a mistake to write the company's obituary. The handset unit is still huge. Although it lost $1.2 billion last year, it brought in a staggering $18.99 billion in sales. Much of that revenue came from the ultralow-cost (ULC) space, which is the fastest growing segment of the cell phone market.

If Motorola's fleeing executives are replaced by new leadership that understands how to deliver the handset experience users want, the company may ride high once again. Just don't hold your breath for another Razr.

"Because all handset manufacturers have access to similar technology, you're seeing a proliferation of handset designs that are mico-nichey," said Dickson. "Look at the iPhone. We're talking about the iPhone constantly, but in reality it has marginal market share. There just aren't that many units out there.

"But when you've got a market shipping in the billions, if you can notch out a percent and a half market share, you've got a pretty good company going. Moving forward, I think you'll see a proliferation of many different designs. It may not be possible to have Razr-type success with so many different usage models."

About the authors Kenton Williston (kentonwilliston@yahoo.com) is DSP DesignLine site editor and president of Cabral Consulting. Seth Benton (travelingseth@yahoo.com) is an analyst at Cabral Consulting and a regular contributor to DSP DesignLine.

Related Links: