All, MOT & NOKIA Views on CDMA; READ DOWN;|
From the September 21, 1998 issue of Wireless Week
Two Wireless Titans: Who They Really Are, Where They're Leading Us
In their first-ever interviews with any U.S. wireless industry publication, Motorola's Chris Galvin and Nokia's Jorma Ollila talked about issues that
mutually concern them. More important, they discussed their ambitions and aspirations, strategies and management styles.
Links to related articles
By Judith Lockwood
Chris Galvin and Jorma Ollila have some things in common. Both are striking, active men in their late 40s. Both are approachable CEOs of global wireless
manufacturing companies. Both are convinced of the long-term growth potential of wireless worldwide.
But the similarities may end there.
Galvin, at the top of Motorola Inc. headquartered near Chicago, plays a reasonable round of golf and proudly displays a photo of the 13-pound bonefish he caught
while flyfishing in the Florida Keys. Ollila, head of Helsinki's Nokia Corp., prefers a pounding tennis game and the Scandinavian practice of jumping between a sweat
in a hot sauna and a dive into a chilly lake.
Galvin runs an electronics amalgam with $29.8 billion in 1997 revenue and 144,000 employees. Nokia, which Ollila refocused from an electronics conglomerate a
few years ago to
a company aimed at telecommunications, generated $9.8 billion in sales last year and has 41,000 employees.
Galvin's critics say he is laboriously trying to turn the rudder of the QE2 simply to face the ship into the wind of the digital revolution. In contrast, Ollila is seen as
racing a speedboat that's skipping over the waves of regional economic crises and shorter product development cycles to win an ever-growing share of the wireless
So who are these guys, really, and where are they taking the wireless industry?
Chris Galvin: Where's The Bold Vision?
Now 47, Chris is the third Galvin to run Motorola. His grandfather, Paul, started the company in 1928 by selling battery eliminators, and his
father, Robert, still sits on the board and advises his son.
Chris Galvin earned a masters degree with distinction from the Kellogg Graduate School of Management at Northwestern University. He
began working summer jobs at Motorola as a high school student, joined the company full time in 1973 and served as senior executive vice
president before being named CEO in January 1997.
Interviewed in his 12th-floor Schaumburg, Ill., office, Galvin deports himself quietly, with a slightly patrician bearing and a soft voice. He
takes copious notes during company meetings. Renowned as a good listener who waits until others have finished speaking before asking
questions, he doesn't hesitate to query subordinates until he's sure he understands a situation.
Galvin is struggling to restore the luster to a company tarnished by a familiar list of troubles: software and customer service problems highlighted when frustrated
customer PrimeCo Personal Communications LP issued a highly visible rebuke at an industry trade show; crises in Asian and semiconductor markets; inability to
accurately forecast demand for digital phones; and internal squabbling that has prevented Motorola from staunching embarrassing market share losses.
Galvin still clings to a goal of 15 percent revenue growth for the next five years, though he offers few specifics on how Motorola can achieve that figure; analysts
During the summer's market gyrations, triggered by regional economic woes, Motorola's stock price cratered well below its 52-week low. Although the price
rebounded with the general market, it still remains 40 percent under its 52-week high.
"What we saw happen to the markets [at the end of August] is what Motorola began to see in January," Galvin said. Conditions in certain Asian markets slowed the
growth of sales, orders and profits and put pressure on pricing. Regarding global economic crises, he added, "There are issues within our control and issues outside
of our control. We will fix everything in our control."
For starters, Galvin axed 6,200 of the total 15,000 jobs he plans to eliminate by mid-1999 and is consolidating paging and semiconductor manufacturing, a process
begun with the closing of a Puerto Rican pager factory. Last week, he halted construction of a $3 billion semiconductor facility in Richmond, Va.
In addition, he is involved in combining the company's cellular, messaging, mobile radio and other business operations into a Communications Enterprise unit designed
to respond more quickly to customer needs. Motorola veteran Merle Gilmore heads up the new organization, representing the latest of several restructuring initiatives
in the past few years.
Further, Motorola is changing the expensive, hands-on approach it used to commercially develop technologies underlying Nextel Communications Inc. and Iridium
LLC and the aborted Celestri satellite project. Instead of using the old model and becoming a carrier itself, Galvin plans to "find a very talented and experienced set
of customers" like wireless operator extraordinaire Craig McCaw and his Teledesic team "who can move the technology to the next step."
He said that in the week before his Wireless Week interview, he met with five major telecom carriers in his headquarters office, just some of the hundreds of
customers he sees annually.
There's more. Galvin is especially pleased with the M-CORE low-power, microRISC controller developed by the company's Semiconductor Products Sector. An
enabling technology for a wide range of telecommunications products, the microcontroller core is at the heart of the company's new iDEN i1000 integrated digital
handset, a bright spot in the company's sales picture. Orders for iDEN subscriber and infrastructure equipment jumped 25 percent in the second quarter.
Galvin also cites Motorola's competency in digital signal processor technology, strengthened last June by an alliance with Lucent Technologies Inc. The two
companies will collaborate on core designs, but separately market full-fledged DSPs-- chips that perform high-speed computations with voice, data and video
signals--based on those cores. The advanced DSPs will be part of wireless handhelds for surfing the Web, cellular phones with video capability and devices with
Whether any of these products or shifts in direction will get to the root of Motorola's problems is anybody's guess. This is a company that can't get handsets out on
schedule. Wireless carriers began receiving Motorola's first code division multiple access handsets in July, but long-awaited CDMA and time division multiple access
800 MHz versions of the popular StarTAC won't be available till the fourth quarter, giving a long lead to competitors including newer entrant Samsung Electronics
with its snappy SCH-2000.
Although Motorola is credited with superb engineering, its grip on the consumer market is tenuous. Galvin's products can be less user friendly and mnemonic than
"Nokia has done a very good job of thinking of the user interface, almost placing a Windows environment on their phones," said Credit Suisse First Boston Analyst
Marc Cabi. "On Motorola's phone, 'function 4' gets you the battery level. It's more cumbersome to use."
Sensitive to such criticism, Galvin last year shifted people and money to market research. To help guide its product design and marketing, Motorola built a database
from results of 4,000 consumer interviews and the company is continuing to "study the consumer in a deeper way," Galvin said. The company also launched its
global, $100 million Wings advertising program. The initiative is meant to emphasize the freedom and information control that wireless brings to a consumer's "work,
family, social and community worlds" as Galvin described it. "We didn't create Wings as an ad campaign, but as a promise ..." he added.
But even with these changes, customers, shareholders and analysts are impatient with promises and the pace at Motorola.
For example, the initial idea for the Communications Enterprise originated two years ago in an organizational development process. Frustrated from dealing with
multiple divisions for single network solutions, "carriers told us, 'We don't want to manage Motorola, we want you to manage all of Motorola's resources on our
behalf,'" Galvin said. The question is why it took so long to do that.
If detail-oriented and technically knowledgeable manager Merle Gilmore, the new integration chief, "had been put in that role earlier, it would have saved us a fair
amount of grief," one company executive said.
Gilmore and Robert Growney, president and COO, are Motorola's "G" men, charged with making the restructure work. "They're like the junkyard dogs who latch
on to a number or a problem," the exec continued.
Chris is a good guy, but gentle, said a paging carrier CEO who has bought equipment from Motorola for decades. "I don't know if a soft-spoken person can carry
that off. Chris may be smarter, but Gilmore and Growney are steely."
Does Galvin want Motorola to continue as a technology conglomerate? Or does he prefer to refocus on what the company does well and exit businesses where it
"Either Galvin is not comfortable making that type of decision yet or he is still evaluating his options," Cabi said.
For example, the Semiconductor Products Sector has played a big role in Motorola's recent business problems, but Galvin isn't talking about divesting the unit, which
had $8 billion in revenue last year, down $500 million from the previous year, and is a supplier to Nokia and Ericsson Inc. Instead, he has chosen to outsource, cut
employment and trim the unit's overly broad product line. A possible reason: The company could focus on developing leading-edge chips and handset designs and let
others build handsets. One company source said Galvin is coming up to speed on the complex semiconductor business, which requires capital expenditures that
"almost defy description."
Galvin defends Semiconductor's historical role as a developer of Digital DNA, the company's moniker for embedded solutions, saying the sector creates new
business opportunities in wireless and other industries.
"If you go to the PCS '98 show, the Consumer Electronics show, the automotive show, and major telecom meetings like the recent one in Geneva, and you look
behind the plastic and steel, the enabler is silicon and software. So the opportunity for us is to do things others can't do."
Looking into the next century, Motorola should be able to aggressively extend its silicon and handset expertise to third-generation systems, its participation in the
Symbian joint venture and new partnerships.
After all, some wireless insiders see the third- generation standards process as tilting toward global system for mobile communications, and Galvin sits atop a pile of
global system for mobile communications patents developed in Motorola laboratories in the 1980s. He finds it puzzling that Nokia and others pay a bundle in
royalties to Motorola, but Nokia and Europe in general continue to get more credit as leaders in the digital migration. "It's a public relations enigma ..." he said.
Galvin would like nothing better than a single 3G standard harmonizing wideband CDMA and cdma2000 standards. "No company has worked harder for the last
two years behind the scenes" to accomplish that, he said.
Although Galvin thinks the ability to synchronize personal computers with PalmPilots is a terrific opportunity, he is less specific about the types of
computing/communications devices likely to emerge from Symbian, the Motorola-Nokia-Ericsson-Psion plc alliance developing an operating system for smart
phones, and its competitors. "There is a lot of opportunity for a variety of approaches," he said, noting that customers are likely to see a teeming market of devices
with Symbian, Java and Microsoft operating systems.
As far as more potential alliances are concerned, Motorola may do a ReFLEX partnership with Microsoft, Galvin said. Last January Motorola announced that it
would make a compact flash module providing FLEX one-way wireless capability for Windows CE devices. Two-way capability, mentioned broadly at the time,
would enhance that agreement.
But Galvin's primary message is not about partnerships Motorola might forge with other manufacturers or any of the other projects it is working on right now. Rather,
it's about what the company is doing to work better with customers.
"We are seeking to create a new Motorola, one that is listening more intently to our customers," he said. "We are more open, responsive and focused. We will work
to deliver the results."
Meanwhile, critics and investors wait for a bold statement from Galvin on what the company should be in five years and what he will do to ensure the transformation
Jorma Ollila: How Long Can You Sustain Fast Growth?
Nokia's Jorma Ollila (pronounced YOR-ma OH-lih-luh) may have underestimated handset demand stemming from AT&T Wireless
Services Inc.'s phenomenally successful Digital One Rate offering, but don't count on his missing a number often.
"He's very good with numbers, and he can find the soft spots fast," said a Nokia executive.
The son of an engineer, the trilingual (English, Swedish and Finnish) Ollila attended college in Wales on scholarship and earned masters
degrees in engineering, economics and political science. Now 48, he began his career as an account manager for Citibank in London, then served in Nokia's
international operations and finance areas before becoming president of mobile phones in 1990.
Inheriting a conglomerate that has manufactured forest products, rubber goods and electronics, Ollila quickly reshaped the company after becoming CEO in 1992.
He focused the company on telecom growth, put his current management team in place and pumped up cellular phone production just ahead of the digital wave. It
was a little like converting a dragging buggy to a sleek supertrain almost overnight.
Under Ollila's leadership, Nokia delivered stunning performance. At the end of the second-quarter, the company has an 17 percent operating margin, the highest of
the big three handset manufacturers. Its stock, which began trading in the United States in 1994, is up 130 percent this year. Handset and infrastructure sales are on
course to exceed company estimates of 25 percent to 30 percent earnings growth in the third quarter, and analysts expect fourth-quarter and 1999 estimates to go
So confident is Ollila that he predicts next year Nokia will be No. 1 on the planet in number of wireless phones sold, growth and return on capital.
"I think that's the only reasonable target ... to set for ourselves, and I think that has energized our organization," said Ollila, who asks employees to call him by his first
name and often eats in the company cafeteria to talk with workers.
Interviewed in San Francisco two months after forcing his four key managers into new jobs, a delighted Ollila said the rotation was already paying off in the kind of
entrepreneurial spirit that spurred the group through earlier troubles.
"I see already a lot of positives," he said, "Aha, here we go again!"
What he did was shift former infrastructure head Matti Alahuhta to handsets, Asia-Pacific executive Sari Baldauf to infrastructure and 3G development and handset
head Pekka Ala-Pietila--who lead development of the wildly popular 6100 series--to vice chairman, new ventures. Dallas-based Olli-Pekka Kallasvuo, chief of U.S.
operations, will move back to Finland as CFO, though he will spend about 40 percent of his time in this country.
Business is so good, both in the United States and elsewhere, that the group is on a roll. Following summer promotion for AT&T Wireless Inc.'s groundbreaking
Digital One Rate plan, demand for Nokia's 6160 multi-network handsets outstripped supply. The popular phone features a calendar, alarm and video games.
To boost volumes by year-end, Nokia added a number of new production lines in its Dallas factory, near chip supplier Texas Instruments Inc. Ollila characterizes the
One Rate program as a "major, major success" for Nokia but is quick to note that orders from Southwestern Bell and BellSouth, the other two big customers
distributing the phones, are also strong.
Clearly, Nokia failed to correctly forecast demand for the multi-network phone. Dan Hesse, president of AT&T Wireless, said the carrier and Nokia both
dramatically underestimated the potential demand for One Rate. Although Nokia's later production acceleration eased spot shortages of the phones, Hesse admitted
AT&T probably lost business during the time it took Nokia to ramp up.
"We could have had larger numbers of subs in the last few months had we not been constrained by phone supply," Hesse said.
With Sprint PCS now buying Nokia's 2170 CDMA phones, the company has strengthened its U.S. position by delivering to all digital standards.
Although the United States ranks third out of the five regions served by the company in terms of overall sales, it represents one-third of handset sales.
"The U.S. will be very, very important for us, and we will turn every stone to do well here," Ollila said.
Demand is also high in Europe and Asia for Nokia's new 8810, the sleekest phone to grace a user's hand. Smaller and lighter than the 6100 line phones, the chrome
8810 GSM unit comes with many of the same features, but conceals the antenna. The stylish handset has become Hong Kong's latest must-have, high-tech gadget
and is sure to catch on in other markets as Nokia brings out versions in other frequency bands.
Nokia is experiencing solid growth in China and Europe, but it does almost no business in Russia, so regional economic crises aren't likely to make a dent in
performance. In addition, Ollila, retaining his banker's ways in the C-Block environment and elsewhere, has kept vendor financing to a mere $200 million, further
reducing customer risk.
Ollila has a two-part vision for Nokia's immediate future, and he "puts a lot of effort into communicating where we are going and the vision as a whole," said a fellow
executive. First, the company must continue to rapidly crank out attractive new phones with jazzy features that consumers like. Already, Nokia is turning out a new
model every 35 days. Second, Nokia must make sure that it has a complete infrastructure offering for wireless and wireline operators who want Internet
protocol-based services to back up the new handsets.
"We see tremendous growth opportunity in the handset business with digitalization really favoring us, and with our strong product portfolio," Ollila said, "we will
continue to bring [out] new products; we will not stop here."
He feels that the Psion EPOC solution forming the basis of the Symbian joint venture successfully addresses software flexibility and power consumption issues that
Nokia encountered with the first two generations of its $995 Communicator, an oversized cellular phone offering Web access. "This solution has all the ingredients of
making it the industry standard operating system." But doesn't that square off Nokia and its partners against Microsoft? "We will see competition from the computer
manufacturers. We don't mind that. But mobility represented by digital cellular has some special features and requirements which are not very easy to fulfill. True
mobility is something that today only the cellular manufacturers can bring to the game."
In fact, Ollila is hedging his bets. Nokia has three agreements in place with Microsoft to use Windows CE as a base for phone solutions, with some fruition
anticipated in 18 months to two years.
Nokia will need to beef up base-station capabilities to compete with Alcatel Althshom, which bought Motorola switch supplier DSC Communications Corp., and
Northern Telecom Ltd., now acquiring Bay Networks Inc. To complement its December purchase of Ipsilon, a Silicon Valley systems company, Nokia is working
on more acquisitions. Ollila expects announcements in six to nine months.
Despite the fact that Nokia continues to recruit and intends to increase its U.S. head count by 500 to 5,000 people before year's end, don't expect Ollila to grow
Nokia beyond 100,000 employees, a threshold he considers a danger zone. Why?
"We feel we are close to an optimal size in this industry," he said. When an organization becomes too big, it is "not so easy to handle, to energize, any longer.
Corporate histories are full of this." Ollila prefers to retain a small-company spirit in a medium-sized company, and for that reason, he would rather partner than
acquire. "For a company of our size, this is an ideal way of creating value."
If Ollila has additional alliances in mind, he's not saying. "We have done tremendously well with organic growth, recruiting young people and building on that ..." A
favorite tactic: hire a talented individual, give that person a bit more responsibility than he or she expected and provide a lot of coaching.
Nokia will need the enthusiasm of youth as it ambitiously pursues development of next-generation systems delivering voice, video and Internet with devices shrunk
much smaller than the clunky Communicator.
Although politics are hampering the standards-making process, Ollila feels a standard will emerge in due course. "There's a lot of hot air" that will be cooled after the
International Telecommunication Union makes its recommendation following a six-month review that begins Oct. 1, he said.
"It is really not feasible to harmonize" W-CDMA and cdma2000 "because you would then compromise on the technical advantages in wideband CDMA agreed
upon by the European [standards] bodies. Dual-mode handsets will solve the problem longer term." In the meantime, Nokia is working toward setting the global
perfomance standard for the wireless equipment manufacturers.
Business Editor Bill Menezes contributed research to this article.
When Chris Met Jorma
In August, Galvin and Ollila met for the first time during a two-hour chat in Galvin's office. Ollila characterized the meeting as a routine, get-acquainted session during
one of his frequent trips to the United States.
When asked about topics discussed, Ollila replied wryly, "the weather." But he did say that the Symbian joint venture and developments in the semiconductor and
Asian markets were discussed. Galvin said boilerplate subjects like standards, intellectual property rights and third-generation systems were brought up.
Was there nothing further? No talk of a takeover of Nokia by Motorola, for instance? After all, Motorola is three times Nokia's size, potentially an attractive
acquisition, and the product lines could be an interesting fit.
"Attractive?" asks Ollila, breaking into a broad smile. "We are what we are, just ordinary guys, working a little harder than the rest of the pack." Then he headed for
the tennis court.
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Motorola's New STarTACs To Include CDMA, TDMA
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Customers Await Realignment
A Letter To Chris
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