Putting the 'motor' in Motorola

CEO Ed Zander and the Razr have helped turn around the venerable company. Now he's looking to a phone called Q to keep things going.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
9 min read
Motorola--it's not exactly the first name that springs to mind when you think of hip, groovy and cutting-edge.

But the wildly popular Razr and the new Q, due to go on sale Wednesday, have turned the Schaumberg, Ill.-based company from a provider of plain-vanilla phones into one of the leading figures in handset design.

The company is also trying to carve out a spot in home automation and videoconferencing.

Responsibility for a good part of the turnaround belongs to Ed Zander. The former chief operating officer at Sun Microsystems landed at Motorola in late 2003 as CEO. Motorola was already contemplating spinning off its chip division and taking other actions to right itself, but Zander oversaw the process. The Brooklyn, N.Y.-born executive is also known for his ability to cut deals with partners such as Apple Computer. Not everything has worked--a brief dalliance in LCD TVs fell flat--but overall, the company seems to have momentum.

Zander recently sat down with editors from News.com, CNET.com and ZDNet News to discuss the Q, tell tales of dealing with Apple CEO Steve Jobs and show off the movies he watches on his phone.

You've been CEO at Motorola about two-and-a-half years. Why don't you give us the highlights and some of the stuff you have left to accomplish?
Ed Zander: We've had some good quarters and done some good things, but we still have a long way to go to being a high-performance leader, which we have been in the past. The good news for the company, for the employees, is that we are winning again. We've gotten some good products out the door. Our financials have been--for nine quarters--really pretty good. We gained market share in many of our markets. We still have to continue to drive innovation and drive customers' sat (satisfaction) to higher levels, and improve our earnings and the quality of earnings--but at least we're moving in the right direction.

In the U.S., people still look at a mobile devices as a cell phone. There might be some pictures on it, but it's mostly a phone. Is that going to change?
Zander: If I want market research, I go outside the U.S. I go crazy here sometimes. Yet I look at my son. He's in his late 20s. He has been a technology kid for many, many years. He uses his Razr; he does pictures; he does Internet access; he does a lot of text messaging; and so he is using more than just doing phone calls.

Videos: In Zander's words
Click here to Play

Talking up the Q
Motorola CEO Ed Zander tells CNET why the Q matters.
DRM this, DRM that
Zander talks about the many digital rights management standards.
Razr sharp
What has the Razr meant to Motorola?
The Motorola-Apple alliance
How did Motorola snag iTunes?

We're introducing the Q, which is going to be a bridge device that not only does your office mail, but does video.

We've had a restriction of the network--the pipes haven't been that big here in the U.S., while they have been in Europe, in Korea, Japan and other places. As Verizon, Cingular, and T-Mobile and Sprint begin to bring these pipes up, I think you're going to see more services and more applications delivered over the Net.

The Q is kind of an odd product. I mean, it's very BlackBerry-like, but you also have a lot of consumer elements in it.
Zander: I'm trying to figure out who to aim these things for and what to call it. It has incredible mail, calendar--the entire Microsoft Outlook experience. Yet it's got a phone that really can make phone calls, unlike the other competing partners, where you need two devices. I mean, this does good if not better RF (radio frequency) quality than some of my traditional products.

We also threw in full MP3 stereo audio and some incredible MPEG capability on video. So who is it aimed for? Well, for the enterprise customers like myself--I've been using this for four months, and it's my mail now, it's my PC on the go. Yet I do have pictures of my kids, I do take some videos off of a PC and watch things on it.

I think we're going to find interesting applications for it. I'm not sure where this whole thing goes, but we've got a kind of convergence device here.

When you talk about docking the Q and using it as a DVR, how do you resolve the DRM (digital rights management) differences in that world? There is DRM that's coming across the cable operators' networks. There is the DRM of mobile phone operators' networks. These things are compatible, on top of which there is iTunes, which has its own form of DRM.
Zander: Well, if we sit back and don't get people to talk and work together, it will self-destruct and people will only make phone calls on these things. The cable guys are getting together, for example, with Sprint. So, you're able now to deal at least with the wire line, the wireless, the cable guys together in a room. The other thing is bringing in content players, and the cable guys have a lot of experience with content players.

Are we going to have one (DRM scheme)? No. But I think it's going to be a small number of them. We've got the Microsoft DRM now in a lot of our technology, and we're working with some of the music players.

I think the music experience has left a bad taste in a lot of people's mouths, because for 99 cents, the people that have made money are with MP3 player companies. The hardware guys made the money, and the guys that owned the content made nothing, and it should be inverted, right? So, I think there is a rethinking in that of how you get dollars monetized on great content.

What about Net neutrality? I mean we heard T-Mobile recently saying, "From now on we're going to prevent voice over IP on our pipes, we are going to prevent instant messaging."
Zander: There are different opinions on that, and I try to stay neutral on Net neutrality. Maybe if Ed Zander wants to drive the more high-performance car, or wants to have an unbelievable experience, maybe he pays more than someone who just might want to run a network for regular data and voice and whatever.

I don't know what the right answer is. I can see both sides of it. I'm big on...keeping things open. Having said that, the Verizons have spent billions of dollars in basically building the Interstate Highway System. Wireless guys say, "Look, I'm ponying up here and doing all the heavy deals, laying all the concrete. I just want to get paid for it."

Couldn't that drive prices up?
Zander: No, because the more people we get on it using video, that could drive costs down. You may have a price inflection for a while, but then it starts driving you down, as it did on the Internet, as it did in PCs.

Speaking of the pipe issue, you're a pretty big supporter of WiMax. You'd think the carriers wouldn't exactly like the idea of WiMax. They've put a lot of money into their pipes, they've got 3G.
Zander: That's a real tough question. I just don't bet against technology. Never. WiMax is coming whether you want it, like it or don't like it.

There are countries in the world that already have procurements for nationwide WiMax--I think Pakistan is one of them--and a few others in Eastern Europe that are saying, "I can't go to 3G. I want to go with a WiMax implementation." There are people in the United States that want to get to rural areas.

I just don't bet against technology. Never. WiMax is coming whether you want it, like it or don't like it.

I think WiMax is going to integrate, coexist, and in some cases, it's going to be sort of a challenge. We work very closely with cellular companies, but we try to make them aware also of the technology.

If you go back 30 years, I can give 45 examples (of disruptive technologies). Linux wasn't going to happen. PCs weren't going to happen. Look, I lived through it. I got whacked a couple of times in my life. When I was doing minicomputers, and along came PCs and workstations and Ethernet...people said, "No, no. It'll never happen." And then great companies like Digital Equipment and Data General aren't around anymore. So, you see things like WiMax and Wi-Fi, and you'd better understand it.

Who is the next Digital Equipment?
Zander: (Laughs) Oh yeah, sure.

Any thoughts on NSA (the National Security Administration, whose domestic eavesdropping program has provoked a political firestorm)? You're in that business, and it's a really sensitive time right now.
Zander: I think security and personal privacy are important. But, I mean, I think about micropayments on these things (holding up a cell phone). Every time I give my credit card to an operator on the phone to buy my wife something, I wonder where that credit card number goes to.

I remember we used to say at Sun, "Your mailbox is the nonsecurest thing you have." It's on the street somewhere, and if somebody is looking at your bill, you wouldn't know it.

(The Razr) got the employees in all of our divisions thinking we could be hot again.

Seeing what happened over here the last few years and traveling around the world, we're still in danger. It goes back to the fingerprint thing at the airports. I'm just speaking for myself right now: I'll get my fingerprint tomorrow to check in, if I don't have to go through the security gates. But I understand some liberties, and I understand we as Americans have had a great democracy based on the fact that we do have privacy and we do have the protection of rights here. There's got to be a balance somewhere.

Our readers like talk about the Razr. It's the most searched-for phone on our site, the most read review on our site. What do you think the Razr has meant for Motorola?
Zander: It did a couple of things. First of all, inside Motorola, I think it got the employees in all of our divisions thinking we could be hot again. This company is 75 years old. We built the first car radio. We built some of the first remote controls for television. People on the moon communicated with Motorola technology. People in World War II in the battlefield used Motorola technology. But we had to prove to ourselves that we could innovate again.

But we're keeping a perspective. We've got to keep innovating. We've got some great stuff coming up the second half of this year. For China, we've got the low-end devices, for India we've got 3G. In Europe, we've got Slvr, which is going big.

One mystery in the industry is how you managed to be a licensee of Apple. How did you do that, when nobody else has been able to?
Zander: Very hard.

Did you have to sit down with Steve (Jobs), or did he come to you?
Zander: No, no, no, we go there. I've known Steve a long time. What happened was I got here in 2004, and he was nice enough to call and congratulate me. Steve and I worked together when I was at Sun. We did some things when he was at Next. We used to shoot the breeze about the industry. He was going great guns with the iPod, and I said, "I should show him these devices (holding up a cell phone) and show him what we can do with these devices." We talked and said, "Let's try iTunes on these devices."

It got difficult because, certainly, Apple has got a hardware business. It was in terms of how many song restrictions and what kind of capabilities.

We are with Cingular now selling this (holding up a Motorola Slvr phone) with iTunes on it. We have other music players from around the world, depending on what the carrier wants.

Do you think Apple can make a difference in the user interface on phones, the way they did with MP3 players?
Zander: I don't know, I don't know. I can't pass judgments because different carriers have their own different interfaces. I think others (hardware manufacturers) are going to enter it, not just the one you mentioned.