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Motorola makes nice with Nextel
Zander aims to save a $2-billion relationship


By Julie Johnsson

Edward Zander

The first customer call Edward Zander made in January as the new CEO of Motorola Corp. was to the Schaumburg company's largest, and perhaps angriest, client: Timothy Donahue, CEO of Nextel Communications Inc.
"It was a defining moment for me in the company, just spending an hour with him," Mr. Zander told an investor group earlier this month. "Because he was nice, but after the niceness wore off — it was a hard trip back, a hard trip back."


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Mr. Zander, known for charming key customers as president of Sun Microsystems Inc. in the 1990s, inherited a company renowned for treating clients cavalierly — none more so than Virginia-based Nextel, the nation's sixth-largest cellular phone operator.
With Nextel poised to end its dependence on Motorola as the sole supplier of its handsets and infrastructure gear, Mr. Zander is pulling out the stops to salvage a relationship that generates more than $2 billion in annual sales for Motorola.

In a shake-up, he has given Chief Information Officer Samir Desai overall responsibility for managing the Nextel account.

It's rare for a CIO at a Fortune 500 company to be given such an assignment; that's usually work for lower-ranking executives. It signals that Mr. Zander is serious about repairing frayed ties with a customer that has spent $15 billion on Motorola products over the past decade.

"That's not uncharacteristic for Zander, who's known for doing whatever it takes (to win customers)," says Christopher Foster, senior analyst with Network Business Quarterly, a New Hampshire-based market research firm.

Nextel's future spending at Motorola is almost certain to fall as the carrier adopts technology that would enable it to use competing vendors.

Mr. Desai's task is to position Motorola to supply some of the next-generation network that eventually will replace iDEN, the walkie-talkie technology that Motorola created for Nextel.

"We're working very closely with Nextel," Mr. Zander said at the investor meeting, a June 17 conference sponsored by San Francisco merchant bank Thomas Weisel Partners LLC. "Round one was iDEN. Tim and his team — hopefully we're working with them to build round two."

Loose ties

That's by no means assured. The two companies still don't have a long-term contract (Crain's, April 12). After a five-year agreement expired in December, they operated without a contract for three months before agreeing to terms that last only through the end of this year.

Nextel, meanwhile, is testing next-generation wireless data networks that eventually could replace iDEN with three vendors: New Jersey's Flarion Technologies Inc. and California-based IP Wireless Inc. and QUALCOMM Inc.

Flarion and IP Wireless are upstarts with ties to Motorola, and, if selected by Nextel, could turn to the Schaumburg company to manufacture their network equipment, analysts say. Motorola expects to create new handsets that will work on whichever network Nextel selects, a spokeswoman says.

But migrating from Motorola's proprietary iDEN network to technology with a broader user base will fundamentally alter the dynamics of this relationship. Nextel will be free to pursue deals for cell phones with whomever it chooses, forcing Motorola to compete for a customer that accounted for $1.46 billion, or 18%, of the company's handset sales in 2003.

A historical perspective

That's where the low-key Mr. Desai comes in. He was selected to be the electronic giant's ambassador to Nextel because he has ties with the carrier that date back to the 1990s, when he was a founding member of the Motorola team that created the carrier's signature walkie-talkie, a Motorola spokeswoman says. (Messrs. Desai and Zander weren't available for interviews.)

A person close to Nextel's senior management says that Mr. Desai is keeping channels of communication open and positive. That's a change from just a few months ago, he adds, when Nextel executives swore "they would do anything but purchase next-generation product from Motorola."

A Nextel spokeswoman declined to discuss Mr. Desai's influence on the companies' ties, adding: "There is strong momentum in this strategic relationship, as Motorola is our largest supplier and we are their largest global customer."

©2004 by Crain Communications Inc.


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