Bit Rate

FUD Factor

11/11/2011 10:21 AM

Cisco CEO John Chambers engaged in the time-tested tactic of spreading FUD — fear, uncertainty and doubt — now that one of his key competitors, Motorola Mobility, is getting sucked into the Googleplex.

On Cisco’s fiscal year Q1 2012 call, Chambers gloated, “All of a sudden, you have major service providers saying, ‘Cisco, we see you now even more important in terms of the partnership and the direction on it.’” (See Cisco’s Chambers: ‘We Got Very Lucky That Motorola Got Purchased By Google’.)

Is that true? Probably, to some extent.

It’s only natural to wonder what will happen to a company’s product strategy and momentum following a major deal. Add to that fact that Motorola Mobility is cutting 800 jobs this quarter.

There are plenty of reasons to think that Motorola Mobility’s Home division just isn’t strategic for Google (see Does Google Actually Have a Plan for Motorola’s Cable Business? and What Will Google Do With Motorola?).

As Google and Motorola Mobility have disclosed, the Internet giant really just wanted the intellectual-property holdings (see Google Originally Wanted To Buy Only Motorola Mobility’s Patents).

Do you really think Google wants to be in the hardware business? The company had a net margin of 29% for 2010. Motorola Mobility’s cable unit had an operating margin of 6.4% for the first nine months of 2011.

In its Oct. 14 proxy statement to shareholders, Motorola Mobility projected that the Home unit will have a 2.5% compound annual growth rate through 2015 (versus 19% CAGR for smartphones and 31% CAGR for tablets). The cable group’s growth profile is in a different league than Google’s core business: The search giant’s top line grew 24% year-over-year in 2010 and 31% for the first nine months of 2011.

So it seems almost a sure bet that Google will spin off, sell or shut down Motorola Mobility at some point.

Meanwhile, don’t think for a second that Motorola hasn’t done similar FUD-ing around about Cisco and Scientific Atlanta over the years, including after Cisco’s $6.9 billion takeover of SA. You also have to think Moto encouraged the idea that Cisco was retreating on set-tops, after Cisco this summer announced it would divest its manufacturing plant in Mexico (see Cisco to Offload Set-Top Plant).

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Programming Note! Don’t miss the Multichannel News breakfast panel discussion at SCTE Cable-Tec Expo 2011 in Atlanta, Video’s Next Act: Setting the Multiscreen Stage, on Tuesday, Nov. 15, right before the opening general session. Click here for more info: www.multichannel.com/SCTE2011.

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