Mobile-review.com Rumors about the integration of Motorola and Siemens are … just rumors

facebook

twitter

russian

Phone Search:

RSS

Samsung Galaxy Note. First Look

Today, large companies, especially corporate giants like Samsung, do not surprise users with extraordinary products...

Apple In A Post Jobsian World HTC Sensation In Use iPhone 4S: Part One

Reviews Editorials

Rumors about the integration of Motorola and Siemens are … just rumors

Rumors that a mobile division of Motorola will take over the similar business from Siemens are greatly exaggerated by press. This assertion can be claimed by facts. It differs from what the other articles say. So, Motorola and Siemens are included in the 4 the largest mobile terminals and have the market share 17 and 8 percent respectively. It is 2 times less than Nokia, the leader of the market, has (37%). But lesser shares don't mean technological or marketing lag. Both companies have rather successful business, the sales increase, which we've seen during the last quarters, is optimistic. Both Siemens and Motorola have the positive tendencies. The first company has rather balanced line of the phones and begins the sales of Siemens C55, which, surely, will be as lucky as C35. Motorola also tries to develop her business, for the first time the company elaborated the new phone line, improved the phones design and ergonomics. The features of the phones are, as always, exceptional.

So, both companies show good results in mobile segment, none of them is going to incur losses. The policy of cutting costs is also similar. Last year the companies had massed reduction of the staff. Today it is much less than it was before. According to the manufacturers, they are not going to continue further reduction, funds, saved after this action, have positive influence on the financial stability of the companies. In case of Motorola, significant job cuts and old problems with production marketing in Europe don't give the company a chance to get a profit. Till now this unit is loss-making. Wireless network division is a heavy burden of this company, the total slowdown of the market causes sales slump. But soon the situation could be improved, the market would pick up. It's no sense to take into account the wireless network units now, there is a stagnation on the market, and all players are equal on this market. It's doubtful that the integration of the companies would be profitable.

What we have in the end? On the one hand, Siemens, which doesn't have problems with the phone line and gets a profit. On the other, Motorola, which practically overcame the crisis situation and would get profit soon. Now, let's imagine the consequences of this integration, in case of take-over of Siemens mobile division, what is said in all articles. So, Motorola should pay good money (turnover of mobile business of Siemens is $4 billion) for take-over and the only advantage which it can get is a distribution net in Europe. There are much more negative items: obvious decrease of profit due to huge payments and stopping the development of Siemens phones. The latter just can't exist because Motorola itself has the most valuable elaboration in the field of 3G terminals, and they were just licensed by Siemens not long ago. It's also necessary to remember that none of the manufacturers can support such quantity of models; the company would have to refuse to produce some of the phone models, what could upset the balanced line. A simple combination of two market shares wouldn't' be very effective in such situation, reduced line would give an opportunity to the more aggressive players to occupy the free market segment. The effect could be, but very short, it would be neutralized for Motorola by payments and further restructurings, which would be necessary while integration (integration of service centers, elaboration and procedure departments). You can see that the idea of integration would cause business setback of Motorola and mock all efforts.

It means that all rumors about integration are just newspaper hoax. It is ought to find who would gain profit from such integration. Surely, not the companies because these rumors caused falling of their stock costs. It means that somebody was interested in this stockjobbing and it can be easily explained. Siemens really negotiated with other manufacturers, but the main theme was not a sale of its division but an access to the CDMA (WCDMA) technology and some other elaborations of smartphones and usual cellular phones. The company gets ready to the advent of 3G networks, not only on the terminal market but also on the wireless network market. Siemens took the 6. position in 2001 and already the 3. one in the first half of 2002 in the wireless infrastructure market (the share was raised from 11 to 13%). The company is going to strengthen its position and become the number two in this business, it is vitally important for Siemens to unveil new elaborations to do this. But often it is easier to license an elaboration, one or another, and create own original product on its basis. Siemens preferred the second way. It's very presumptuously to make conclusion about the business sales, rather it is the question of the access to the technologies.

We have an impression that somebody, acquainted with the situation, counted the cost and played its own game. The following fact proves it once more time. Last year, after appearance of the new joint enterprise SonyEricsson, the rumors about the integration of the mobile divisions of Siemens and Motorola were widely spread. It came to nothing at that time and it would be so today, only with the one exception: somebody would get profit from this situation.

And now let's predict how the infrastructure market could develop. Launching of 3G networks is expected not earlier than in 2004, mass nets charging would be only in 2005 by the most optimistic estimations. The increase of the net equipment market would be considerable but the quantity of the operators wouldn't change greatly. It means that the old contacts and the loyalty to the certain brand would be saved. Even if Siemens has an innovative decision, it wouldn't be able to be a competitor to other equipment makers, at least because the company has lack of productive capacities. And new plants are necessary to spurt.

Two key moments are often not taken into account. Firstly, the production of mobile phones and their distribution allows to make complex contracts with the operators on easy terms. Secondly, consideration must be given to the brand cost. The main unit of brand Siemens is handset business, and if it disappears the brand name would be of less importance.

So, it is anticipated the wireless network equipment market picking up, though it is difficult to predict the extent of growth. It wouldn't be repartition of the market because the quantity of the customers wouldn't change. It is not worth to take seriously that gaining current elaborations and some amount of money are great advantages, there are much more negative moments: loss in brand value, not such favourable terms while making contracts with large operators. Also the market growth would be continued only several years and then we'd seen the stagnation again, which could last 5 or 7 years. The development of the infrastructure market is reasonable only in near-term outlook, in case of the future sale, when the demand would be the greatest. In the long-term outlook the decision to develop this business would cause only minuses, it is profitable only in case if Siemens refuses to be in the field of communications, what is impossible as you understand.

Published — 07 October 2002.

Have something to add?! Write us... eldar@mobile-review.com

News Reviews Articles PDA MP3 Forum Advertise