Closing price 8/4/08
| 9.82 |
Motorola Hires Jha From Qualcomm to Lead Phone Unit (Update1)
By Ville Heiskanen
Aug. 4 (Bloomberg) -- Motorola Inc., preparing to split itself in two, hired Qualcomm Inc.'s Sanjay Jha to oversee the money-losing mobile-phone business after sales plunged for six straight quarters.
The stock rose 11 percent after Motorola said that Jha, Qualcomm's former operations chief, will become co-chief executive officer with Greg Brown. Jha will run the handset unit, which accounts for 41 percent of revenue and hasn't had a hit since the best-selling Razr, introduced in 2004.
The division has lost more than $1.9 billion since the start of last year as customers fled to competitors such as Apple Inc.'s iPhone, pushing Motorola to third place in global mobile- phone sales. Jha, who joined Qualcomm in 1994, helped that company supplant Texas Instruments Inc. last year as the world's biggest maker of chips for mobile phones.
``They needed someone high profile with engineering talent, and certainly this guy fits the bill,'' said Morgan Keegan & Co. analyst Tavis McCourt in Nashville, Tennessee. ``The only downside is that he doesn't necessarily have any consumer products expertise.'' He rates Motorola ``market perform'' and doesn't own any shares.
Motorola, based in Schaumburg, Illinois, climbed $1.01 to $9.82 at 4:01 p.m. in New York Stock Exchange composite trading. The gain was the largest since July 31, when Motorola reported results that exceeded analysts' estimates. Qualcomm fell $2.60, or 4.7 percent, to $52.87 in Nasdaq Stock Market trading.
Brown, 47, also will be CEO of the company's profitable and faster-growing broadband business, which makes cable-television set-top boxes and wireless-networking equipment. Brown, who took over from Ed Zander in January, announced plans to break the phone unit from the rest of the company in March and last week said the division will occur in the third quarter of 2009.
Revived by Razr
Zander had revived Motorola with the Razr, the all-metal flip phone that sold more than a 110 million units. Motorola has since failed to introduce a device to match the Razr's success, losing customers to the iPhone and e-mail-equipped handsets from Nokia Oyj and Samsung Electronics Co.
Stu Reed, the former head of the mobile-devices unit, left the company in March after Brown assumed direct control. Jha, 45, will have to improve phones to challenge Apple, which sold a million iPhone 3G phones in their first three days out, McCourt said. Last week, Motorola said it plans to introduce 34 new devices in the second half of this year.
``In terms of actual products hitting the street, you're not going to see his impact before 2010,'' McCourt said. ``Probably his biggest impact will be the level and type of engineering talent he will attract to the company over time.''
Customers Flee
Motorola's share of phone sales has fallen by more than half in the past two years as consumers snapped up the iPhone and e- mail-equipped handsets from Espoo, Finland-based Nokia. The company trails Nokia and Samsung, based in Suwon, South Korea, in global handset shipments.
The split will increase costs as Motorola will have to create two management teams and two sets of overhead expenses, according to Richard Windsor, a Nomura International analyst in London. Costs stemming from the split, including legal fees, cut Motorola's profit by 1 cent a share last quarter.
``There's a tremendous opportunity here to take this business to the next level,'' Jha said in an interview today. He said he will manage costs ``aggressively'' and hire a team with experience in branding and distribution. He declined to say when he expects the business will make a profit or increase sales.
Len Lauer, 51, will replace Jha as operations chief, Qualcomm said today. Before his promotion, Lauer was an executive vice president at Qualcomm, overseeing the services business. He also worked at Sprint Nextel Corp. and International Business Machines Corp. before joining the chipmaker.
Jha's Record
At San Diego-based Qualcomm, Jha won sales from Texas Instruments as customers used more of its semiconductors for new devices that surf the Web and download videos. Sales at Qualcomm's chip division have climbed 70 percent since 2004, when Jha became executive vice president.
Jha inherits a business that may already be in recovery, McCourt said. The sales decline slowed last quarter as Motorola shipped more devices than analysts predicted. The company also has slashed more than 9,000 jobs since the start of 2007.
Jha, whose contract is initially for three years, will make at least $1.2 million in salary and get a bonus this year of $2.4 million. He'll also get equity totaling 3 percent of the mobile- phone unit after the split, consisting mostly of stock options. If the split doesn't happen by Oct. 31, 2010, he'll get $30 million in cash.
Before joining Qualcomm, Jha worked in design engineering roles with Brooktree Corp. in San Diego and GEC Hirst Research Labs in London. He has a doctorate in electronic and electrical engineering from the University of Strathclyde, Scotland.
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