Canavan calls on Ireland for mobile innovation

Motorola vice-president hopes Irish unit will drive changes in technology, writes John Collins

With his silver hair pulled back into a pony-tail and glasses that bring to mind John Lennon in his heyday, Pat Canavan doesn't look like your average senior vice-president of a major US corporation.

A good deal of those grey hairs were probably acquired in the past seven years as Motorola, the company he has spent the last 25 years with, went through the worst period in its 77-year history.

During 1998 Motorola, which employed 125,000 people, parted company with 25,000 staff and took an almost $2 billion (€1.66 billion) restructuring charge as it exited unprofitable lines of business.

The company returned to profitability for a couple of years, but between 2001 and 2003 it was once again forced to downsize, only returning to profitability in the fourth quarter of 2003.

In January of the following year Ed Zander, a high-profile venture capitalist and former president and chief operating officer of Sun Microsystems, succeeded Chris Galvin, the grandson of the company founder, as chief executive.

Zander has been credited with turning the company around, but according to Canavan, the return to profitability "doesn't just correlate with Ed Zander coming - a lot of the steps were put in place in 2002 and 2003".

The big lesson learned was not to add headcount to support growth but to outsource manufacturing and make efficient use of third-party software developers and designers.

"In years past, the reason we got into trouble is that we threw capital dollars and labour dollars at growth," explains Canavan. "It keeps you going for a while but, if you stall or the economy stalls, you really can't handle it and it's not fair to people."

The changes seem to be have been effective. In 2004, the company had net earnings of $1.5 billion. The quarterly results for 2005 have also been encouraging with year-on-year growth - sales for the third quarter, released in the middle of last month, were a record $9.42 billion, up from $7.5 billion in the same quarter a year ago.

"This is pretty tremendous growth. The way Zander sometimes puts it, if we grow the same way through all four quarters we'll have grown a Fortune 100 company just in the incremental growth of 2005 over 2004," says Canavan.

Motorola has expanded far from its roots as a manufacturer of car radios and now plays in a variety of sectors related to mobility or wireless communications.

The primary business is still mobile phone handsets, which accounts for almost 60 per cent of its revenues. In the early days of the mobile phone, Motorola was the best-selling brand, but it has long ceded that crown to Nokia, which consistently has had over 30 per cent of the market.

Motorola's market share hovers around 20 per cent, but Canavan says that it has steadily been eating into Nokia's lead while fighting off aggressive new players from Asia such as Samsung and LG Electronics.

Last year's introduction of the RAZR, at the time the thinnest mobile phone ever released, has been one of its major successes - flying in the face of operator wisdom that customers wanted cheaper handsets.

Canavan calls it an "icon product" that has helped attract consumers back to the Motorola brand, even if they end up buying a different handset. So far this year, it accounts for just 12 per cent of phone sales. More importantly, according to Canavan, was a change in attitude at the company, which he believes had become arrogant when it was number one for so long.

"We've learnt our lesson and are refocusing our sales effort," he says. "We're telling the operators we've got a quality product, you will get it on time and we are thankful for your business."

Canavan was in Ireland last week as part of a Zander initiative to get senior management out into the field to meet staff around the world. As often as possible, the 15 members of the company's senior leadership team hold one of their monthly meetings outside the US. Last month that meeting was at the European headquarters in the UK and following the meeting, the managers spread out across Europe to visit Motorola facilities.

Following "Europe week", Canavan estimates that 87 per cent of employees in the region will have met a senior member of the Motorola management team. "We of course get an idea of what's on people's minds - that's the real pay off," he says.

Canavan has been an occasional visitor to Ireland since 1976 when, at Digital Equipment Corporation, he was involved in the opening of its Clonmel facility. On this visit, he had a "town hall meeting" with the majority of the 480 staff at Motorola's Cork facility, where he briefed them on the recent third-quarter results.

One can't imagine the software engineers in Cork will have been too tough on Canavan - as well as the record revenue figure earnings per share were up an impressive 283 per cent to $0.69.

To underline the importance of Cork to the parent company, he points out that headcount at the unit never dipped during any of the purges of recent years and the centre is currently recruiting another 30 staff. "The contribution that they make to the success of the business guaranteed them during that time," he says.

Overall, he says, Motorola is doing well in Ireland and the company has increased its share of the mobile phone market here - not that he's resting on his laurels. "We are not happy with what we've got. We'd love to double it, we'd like to be number one in all the major carriers here in Ireland," he says.

The company is also hoping to be awarded the tender for the new digital Garda radio system.

The current analogue system can easily be listened in to by criminals with cheap scanners and it also has holes in coverage.

However, despite lobbying by the Garda Representative Association (GRA), there's still no sign of a tender process. Although Canavan won't say it, he's clearly frustrated at the delay.

"We will definitely choose to participate at this point in time," says Canavan. "Government business is really the bedrock of Motorola's history. We have been in public safety since the first days of the company. Whenever there is an opportunity on the planet, we intend to bid on it."

Motorola invented two-way police radio in the 1930s and its equipment based on the TETRA (Terrestrial Trunked Radio) has won 215 contracts in 54 countries. In partnership with its Irish distributor Sigma Wireless, it built the first commercial TETRA network in Ireland for the Luas.

He also hopes that Motorola can win business from the Irish mobile operators as they enhance their networks to offer new services around 3G. That's where the contribution of the Cork software engineers will come in and he is excited about the possible contribution that team can make.

"A lot of the neat stuff to improve cellular system performance is what they are doing down in Cork," he says, adding that he would like Ireland to be a "beacon country" for Motorola, which can be used to showcase its technology to customers.