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Motorola changes face of mobile industry

Manufacturer to sell its technology to rivals

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Motorola has decided to sell its proprietary technology for 2.5 and 3G phones to rivals, threatening to change the face of the mobile industry forever.

The company sold the idea to the FT as a natural step to how the PC market works, with a large number of companies competing on design, price and brand rather than the actual technology. Critics have suggested the move has more to do with Motorola's troubled finances.

The company's semiconductor products division will henceforth sell its integration technology - chipset, software, development tools, reference design, test environments and type certification support - to third parties. "We see this as the beginning of a major discontinuity that parallels the PC industry in the early 1990s with the rise of the motherboard industry and major branded assemblers," said Fred Shlapak, Motorola VP and president of semiconductors.

Whatever the reason behind it, the shift in strategy by one of the biggest mobile manufacturers (15 per cent of the market) has huge implications for other manufacturers and the mobile industry as a whole. It is hard to fault the logic behind the decision: all mobile handset manufacturers have released shaky figures this quarter, handset sales have dropped and there is a notable move toward outsourcing handset production.

Handsets are also analogous these days, as demonstrated by the huge increase in marketing put behind new phones. What differentiates phones now is design and software. It therefore makes sense for a manufacturer to leave the black arts of selling to other companies and simply sell the technology. Motorola has said it expects to announce several deals in the next few months.

And as if to confirm the change in the mobile market, Vodafone announced today that it has asked young British artists to design mobile phone logos that will be available to download at 36p a shot. And if any doubt remained about mobiles being far more than a practical device, phone cover company Comeleon has just won a £500,000 contract for a new phone cover featuring Formula 1 champion Michael Schumacher.

Motorola has chosen an interesting day to announce its new strategy. Its phone factory in Scotland is due to close today, with the loss of 3,100 workers. Motorola said three months ago it was shutting the factory thanks to the reduction in handset demand.

A fortnight ago, Motorola posted a £163 million quarterly loss. It was the second loss-making quarter in a row and followed 16 years or profit making by the company. ®

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