1303 East Algonquin Road
Schaumburg, Illinois 60196-1079
Telephone: (708) 576-5000
Incorporated: 1928 as Galvin Manufacturing Corporation
Sales: $16.96 billion
Stock Exchanges: New York Midwest London Tokyo
SICs: 3674 Semiconductors and Related Devices; 3663 Radio and TV Broadcasting and Communication Equipment; 3661 Telephone and Telegraph Apparatus; 3571 Electronic Computers; 3694 Electrical Equipment for Internal Combustion Engines; 3812 Search and Navigation Equipment; 3670 Electronic Components and Accessories.
Electronic communications pioneer Motorola, Inc. ranked among the 25 largest companies in the world in the early 1990s. At that time, the corporation sold 45 percent of the world's cellular phones and an overwhelming 85 percent of its pagers. Motorola also commanded a very respectable third-place showing among the world's manufacturers of semiconductors. Over half of its sales were made outside the United States. Motorola also gained recognition over the years for its emphasis on quality, for which it garnered the first annual Malcolm Baldrige National Quality Award in 1988, and for its innovative employee welfare and training programs.
The story of Motorola was an American classic. It began during the 1920s, when a small-town Illinois boy, Paul Galvin, went to Chicago to seek his fortune. Galvin had returned from World War I with an interest in the technological changes of the time. In 1920 he worked for a Chicago storage-battery company, and one year later he opened his own storage-battery company with a hometown friend, Edward Stewart. After two years of rocky operations, the government closed the business for non-payment of excise taxes.
The former partners, undaunted by this setback, joined forces again three years later when Galvin bought an interest in Stewart's new storage-battery company. But with the rise of electric power, batteries lost popularity with the public. To keep their business afloat, Stewart created a device that allowed a radio to be plugged into an ordinary wall outlet, aptly named the "battery eliminator." Once again, the storage-battery company failed, though Galvin was able to buy back the eliminators at the company's public auction. Joe Galvin joined his brother Paul at this time to peddle the eliminators to various retail distributors, such as Sears, Roebuck and Company. In 1928 Paul formed the Galvin Manufacturing Corporation with five employees and $565, and continued making battery eliminators.
During the Great Depression, Galvin Manufacturing Corporation found itself burdened by inventory that it could not sell because of restricted market conditions and underselling by other manufacturers. To rectify this situation, Galvin began experimenting with the virtually untouched automobile-radio market. Before this time, automobile radios had been deemed impractical because they had very poor reception. The first commercially successful car radio came out of Galvin Manufacturing in 1930 under the brand name Motorola. The name, coined by Galvin, was a hybrid of "motor" and "victrola." The units sold for about $120 including accessories and installation, which compared favorably with the $200-$300 custom-designed units then available.
During the 1930s the company also established its first chain of distributorships (Authorized Motorola Installation Stations), began advertising its products in newspapers and on highway billboards, and started to research radios to receive only police broadcasts. The market for police radios appeared so promising that the company formed a police radio department. In 1937 Galvin Manufacturing entered the home-radio market, introducing the first push-button tuning features.
In 1936, after a tour of Europe with his family, Galvin returned home convinced that war was imminent. Knowing that war could provide new opportunities, he directed the company's research into areas he felt could be useful to the military. The Handie-Talkie two-way radio and its offspring, the Walkie-Talkie, resulted. Used by the United States Army Signal Corps, these were among the most important pieces of communications equipment used in World War II.
Galvin was always concerned with the welfare of his employees, and in 1947 he instituted a very liberal profit-sharing program that was used as a model by other companies. By this time, the company employed around 5,000 people and had formed an early human-relations department. The company's good labor relations enabled it to remain nonunion throughout its history. After Galvin's son Robert and Daniel Noble, an engineer who would eventually have a tremendous impact on the future of the company, joined the company in 1947, its name was officially changed to Motorola.
The first Motorola television was introduced that same year. It was more compact and less expensive than any competing models--Motorola charged $180, while its nearest competitor charged more than $300. The Motorola "Golden View" set became so popular that within months of its introduction the company was the fourth-largest seller of televisions in the nation.
Later in 1947, Motorola bought Detrola, a failing automobile-radio company that had manufactured car radios for the Ford Motor Company. The purchase was made on the condition that Motorola retain Detrola's contract with Ford. This deal greatly strengthened the company's automobile-radio business. Motorola subsequently supplied 50 percent of the car radios for Ford and Chrysler as well as all of the radios for American Motors.
The creation of the transistor in 1948 by Bell Laboratories marked a major turning point for Motorola. The company had concentrated on the manufacture of consumer products, and Paul Galvin felt that the company was unequipped to enter the transistor and diode field. However, with his son Robert and Dan Noble advocating the company's expansion into this new market, a semiconductor-development group was formed. The first Motorola product to result from this effort was a three-amp power transistor, and later a semiconductor plant was constructed in Arizona. Following this expansion, Motorola supplied transistors to other companies for use in products that Motorola also manufactured. In effect, Motorola found itself in the awkward position of supplying its competitors with parts.
During the 1950s, Motorola became involved in the Columbia Broadcasting System's failed entry into the color-television industry. Motorola used the CBS-designed and produced color tubes in its color-television sets. After a convoluted struggle for approval from the Federal Communications Commission (FCC), the CBS system was rejected in favor of a system developed by the Radio Corporation of America (RCA). Despite this setback, Motorola pioneered many new features in television technology, including a technique for reducing the number of tubes in black-and-white sets from 41 to 19.
By the middle of the decade, Paul Galvin realized that the company had become too large for one man to continue making all the decisions. He granted divisional status to various businesses, giving each its own engineering, purchasing, manufacturing, and marketing departments and regarding each as an individual profit center. This was the beginning of Motorola's famous decentralized-management scheme. As part of this reorganization, Robert Galvin became president and each divisional manager an executive vice-president. Paul Galvin became chairman of the board and CEO, which he remained until his death in 1959. Beginning in 1958, Motorola became involved in the American space program. Virtually every manned and unmanned space flight since that time utilized some piece of Motorola equipment.
Motorola made several acquisitions during the 1960s that left observers baffled. It purchased, and sold almost immediately, Lear Inc.'s Lear Cal Division, which manufactured aircraft radios. This was followed by the purchase and subsequent divestment of the Dalberg Company, a manufacturer of hearing aids. Acquisitions were also considered in the fields of recreation, chemicals, broadcasting, and even funeral homes. This trend continued into the 1970s and constituted a period of real adjustment for Motorola. However, three very important corporate strategies grew out of this floundering.
First, the company began to expand operations outside the United States, building a plant in Mexico and marketing Motorola products in eight countries, including Japan. An office in Japan was opened in 1961, and in 1968 Motorola Semiconductors Japan was formed to design, market, and sell integrated circuits. Second, Robert Galvin instituted several progressive management policies. In 1974, the company launched an employee training and involvement program that emphasized teamwork and empowered workers at all levels to make decisions. Such policies laid the groundwork for Motorola's much-touted quality and efficiency gains of the 1980s. Third, in the late 1970s, Motorola gradually began to discontinue its consumer-product lines in favor of high-tech electronic components.
Motorola's radio and television interests were the first to go. In 1974 Motorola sold its consumer products division, which included Quasar television, to the Matsushita Electric Industrial Company of Japan. Three years later the company acquired Codex Corporation, a data-communications company based in Massachusetts. In 1978 Universal Data Systems was added. Motorola began phasing out its car-radio business at the end of the decade, and made its last car radio in 1983. These maneuvers were intended to concentrate Motorola's activities in high technology.
Motorola's largest and most important acquisition came in 1982 with its purchase of Four-Phase Systems, Inc. for $253 million. A California-based manufacturer of computers and terminals, Four-Phase also wrote software for its own machines. The purchase puzzled observers because Four-Phase was in serious trouble at the time. Though Four-Phase did quite well in the 1970s, by the end of that decade its product line was aging, its computer-leasing base had grown too large, and its debt was tied to the rising prime rate. These problems had their origin in the company's insistence upon manufacturing its own semiconductors instead of purchasing commercially available components--an insistence that consumed time and money, and also meant that new product developments at Four-Phase were slow in coming. However, Motorola was looking for a custom-computer manufacturer and was impressed with the sales force at Four-Phase: Motorola's grand strategy was to branch into the new fields of office automation and distributed data processing.
Distributed data processing involved the processing of data through computers that were geographically distributed. The purchases of both Four-Phase and Codex made perfect sense when viewed in light of Motorola's intent to enter this field. The plan was simple: data processing provided by Four-Phase computers would be linked by data-communications equipment provided by Codex, and Motorola proper would provide the semiconductors and much of the communications equipment for the operation. The goal was to create a fully mobile data-processing system that would allow access to mainframe computers from a pocket unit. Motorola also figured that its experience in portable two-way radios and cellular remote telephone systems would prove valuable in this endeavor. Although Motorola was able to turn Four-Phrase around temporarily, Four-Phrase lost more than $200 million between 1985 and 1989.
The cellular remote telephone system was developed by American Telephone and Telegraph's Bell Laboratories in the early 1970s. The system functioned by dividing an area into units, or cells, each with a low-level transmitter that had 666 channels. As a driver using a phone moved from cell to cell, his call was carried on the transmitter in each successive cell. After he left a cell, the channel he was using became available for another call in that cell. (Earlier remote systems relied on a powerful transmitter covering a large area, which meant that only a few channels were available for the whole area.) Motorola aided in the design and testing of the phones and supplied much of the transmission-switching equipment.
Motorola's early estimates of the cellular phone market seemed astronomical--one million users by the early 1990s--though in fact there were more than 4 million users by 1989. However, the system developed major problems. There were massive licensing and construction problems and delays. Added to this were complaints about the quality and reliability of Motorola's phones compared to Japanese-manufactured remote phones. A surplus of phones, coupled with the desire to capture a large market share, soon prompted Japanese companies to cut their prices radically--some by as much as half. Motorola went straight to the U.S. government to request sanctions against the Japanese companies. In 1986 the commerce department declared that eight Japanese companies were in fact "dumping" their products (selling at a below-cost price) and were liable to pay special duties. This gave Motorola a new edge in the cellular-phone market--it soon became the world's top supplier of cellular phones, though the competition remained intense.
Motorola's relations with Japanese companies has been checkered. In 1980 it formed a joint venture with Aizu-Toko K. K. to manufacture integrated circuits in Japan. Two years later Motorola acquired the remaining 50 percent interest in the company from Aizu-Toko and created Nippon Motorola Manufacturing Company, a successful operation run along Japanese lines mostly by Japanese. Also in 1982, Motorola received a $9 million order for paging devices from Nippon Telegraph and Telephone. These ventures were followed by vigorous pleas from Robert Galvin for the U.S. government to respond in kind to Japan's trade tactics. In fact, Galvin was a founder of the Coalition for International Trade Equity. This organization has lobbied Congress for legislation that would impose tariffs on foreign companies that are subsidized by their governments. Motorola further called for a surcharge on all imports to reduce the U.S. trade deficit. Other major companies in the United States (Boeing and Exxon among them) have rejected these measures on the grounds that they would spark trade wars that would damage the position of U.S. companies doing business with Japan.
In 1986, Motorola made a groundbreaking deal with Japan's Toshiba to share its microprocessor designs in return for Toshiba's expertise in manufacturing dynamic random access memories (DRAMs). Prior to this arrangement, the Japanese had driven Motorola, along with nearly every other American semiconductor company, out of the DRAM market.
In 1988, Motorola took on the Japanese in another way: that year its Boynton Beach, Florida, plant began producing the company's Bravo model pocket pager in a fully automated factory. The prototypical facility used 27 small robots directed by computers and overseen by 12 human attendants. The robots could build a Bravo within two hours of the time an order was received at corporate headquarters in Schaumburg, Illinois; the process normally would take three weeks.
Motorola's adoption of "Total Quality Management" (TQM) principles during the 1980s furthered that push for quality and earned it the admiration of analysts and competitors alike. Building on the foundation laid by his employee empowerment programs of the 1970s, Robert Galvin was able to instill a drive for continuous quality improvement in his teams of workers. From 1981 to 1986, Motorola reduced its defect rate by 90 percent. By 1992, the company had achieved "six sigma quality": less than 3.4 mistakes per million. The corporation did not sacrifice productivity for these quality improvements, either: from 1986 to 1994, sales per employee increased 126 percent, in spite of a net increase in the work force. Some divisions had achieved such high quality rates that they were striving to reduce error rates to defects per billion in the 1990s. The corporation's ongoing goals were to reduce error rates tenfold every two years and simultaneously reduce production time tenfold every five years. Motorola's campaign for quality was highlighted by its 1988 receipt of the first annual Malcolm Baldrige National Quality Award.
In 1989 Motorola introduced the world's smallest portable telephone, but soon found that its new product was excluded from the Tokyo and Nagoya markets, two cities that together represented more than 60 percent of the $750 million Japanese cellular phone market. When Motorola cried foul, the Japanese government agreed to allow adapted Motorola phones in Tokyo, but only for use in automobiles. This excluded the 90 percent of portable phones used on trains. In response to these restrictions, Motorola led the push to impose trade sanctions on certain Japanese imports. Then-President George Bush publicly accused Japan of being an unfair trading partner and threatened to take punitive action if the Japanese did not remove barriers to free trade.
The growth of the computer industry has provided both opportunities and challenges for Motorola. Throughout the 1980s, the company's most popular 68000 family of microchips powered personal computers (PCs) and workstations built by Apple Computer, Inc., Hewlett-Packard Company, Digital Equipment Corporation, and Sun Microsystems, Inc., among others. Upstart competitor Intel Corporation, whose chips were the cornerstone of International Business Machines Corporation (IBM) and IBM-compatible PCs, launched a successful campaign to capture the microchip market. Intel combined ever-increasing power and speed with aggressive marketing to win the semiconductor market from Motorola. Undaunted, Motorola teamed up with industry giants Apple and IBM to develop the PowerPC in the 1990s. As of 1993, Motorola ranked third among the world's semiconductor manufacturers, behind Intel and Japan's NEC Corp.
In many respects, however, Motorola's computer chip operations have been eclipsed by its communications interests. The company's 45 percent leading share of the global cellular phone market and whopping 85 percent of the world's pager sales forced it to place an increased emphasis on consumer marketing in the early 1990s. Accordingly, Motorola recruited market specialists from General Electric, Black and Decker, Apple, and (as Fortune put it in a 1994 article) "even Mattel." The company began selling its pagers at mass merchandisers and offering them in a variety of colors. Evidence of its re-entry into the consumer market after nearly twenty years came in the form of a 1993 television and print campaign targeted at women (especially mothers).
Over the course of the 1980s, Motorola's sales and profits tripled, to $9.6 billion and $498 million, respectively, in 1989. By 1993, sales vaulted over 56 percent to $16.96 billion and earnings more than doubled to over $1 billion. The company underwent its third transfer of power that year, when Robert Galvin "retired" to the office of chairman of the executive committee of the board at the age of 71. Gary L. Tooker, former president and chief operating officer, advanced to the chair and chief executive office, and Galvin's son Christopher assumed Tooker's responsibilities.
Although some analysts worried that Motorola, like many other large, successful corporations, would fall into complacency, that fear did not seem well founded. The company has earned a reputation for "self-obsolescence" that seemed likely to keep it in the vanguard of wireless communication. For example, the Motorola Integrated Radio Service (MIRS) combined features of cellular phones, pagers, and two-way radios in a system that could rival all three. Motorola hoped to undermine the cellular "duopolies" organized by the Federal Communications Commission by operating the system over Specialized Mobile Radio (SMR) frequencies that had been limited to use by taxis and tow trucks. Motorola also continued work on its multi-billion dollar "Iridium" project, a plan to wirelessly interconnect the entire globe through a system of low-earth-orbiting satellites (LEOS). The company hoped to complete the project by 1998.
Continuing globalization at Motorola focused on Asian, Eastern European, and Latin American markets in the early 1990s. In 1993, the company announced "Corporate America's biggest manufacturing venture in China": two plants for the manufacture of simple integrated circuits, pagers, and cellular phones. Motorola executives expected foreign revenues to constitute 75 percent of annual sales by the turn of the century, up from 56 percent in 1993.
Principal Subsidiaries: Codex Corporation; Motorola Credit Corporation; Motorola International Capital Corporation; Motorola International Development Corporation; Universal Data Systems; Motorola Australia Proprietary Ltd.; Motorola (China) Electronics Ltd.; Iridium, Inc.; Motorola International Sales, Inc.; Motorola Lighting, Inc.; Motorola Satellite Communications, Inc.; Motorola Telcarro de Puerto Rico, Inc.; Motorola A.S.; Motorola Electronique Automobile; Motorola S.A. (France); Motorola Electronic GmbH (Germany); Motorola B.V. (The Netherlands); Motorola Communications Israel Ltd.; Motorola Telephone Cellular Communication Ltd.; Motorola SpA (Italy); Nippon Motorola, Ltd. (Japan); Motorola Electronics Sdn. Bhd. (Malaysia); Embarc Communication Services, Inc.; Motorola Philippines, Inc.; Motorola Espana S.A.; Motorola A.B. (Sweden); Telcel S.A.; Motorola Foreign Sales Corp.; Motorola Componentes de Puerto Rico, Inc.; Motorola Portavoz de Puerto Rico, Inc.; Motorola Telcarro de Puerto Rico, Inc.; Motorola Canada Ltd.; Motorola Limited (United Kingdom); Motorola Semiconducteurs S.A. (France); Motorola GmbH (Germany); Motorola Asia Ltd. (Hong Kong); Motorola Semiconductors Hong Kong Ltd.; Motorola Israel Limited; Motorola Korea, Ltd.; Motorola Malaysia Sdn. Bhd.; Motorola Semiconductor Sdn. Bhd. (Malaysia); Motorola de Mexico, S.A.; Motorola Electronics Pte. Ltd. (Singapore); Motorola Electronics Taiwan, Ltd.
Brown, Kathi, A Critical Connection: The Motorola Service Station Story, Rolling Meadows, Illinois: Motorola University Press, 1992.
Galvin, Robert W., The Idea of Ideas, Rolling Meadows, Illinois: Motorola University Press, 1993.
Henkoff, Ronald, "Keeping Motorola on a Roll," Fortune, April 18, 1994, pp. 67--78.
Petrakis, Harry M., A Founder's Touch: The Life of Paul Galvin of Motorola, New York, McGraw-Hill, 1965.
Source: International Directory of Company Histories, Vol. 11. St. James Press, 1995.