All Things Digital

In landing a new chief executive for its troubled mobile device business, Motorola Inc. is clearly banking on the old adage that “you get what you pay for.” Sanjay Jha, the co-chief executive of Motorola, managed to seal a compensation deal that The Wall Street Journal estimated could be worth $94 million, including restricted stock, options, base pay and a special payment. That’s more than nine times what he was earning at Qualcomm Inc., his previous employer, and would put him easily in the upper echelon of the country’s highest-paid CEOs, according to rankings by Forbes.

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What do CEOs say to each other in private? Mean Street intercepted an (imaginary) email sent this morning by Merrill Lynch CEO John Thain to Sanjay Jha, newly appointed co-CEO of Motorola.

Dear Sanjay,

Many congratulations on your new job–and welcome to our ranks. It is a rare privilege to be CEO of a desperate company.

I’ve been at it now for almost nine months at Merrill Lynch, and I’ve learned a thing or two that you might find useful.

I hate to start on a sour note, but Monday’s announcement could have been handled better. Your arrival at Motorola was trumpeted a bit too loudly.

“A stunning win for Motorola,” cheered the Wall Street analysts. And your recruitment alone added more than $2 billion to the market value of Motorola.

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Merrill Lynch telecom equipment analyst Vivek Arya cut his rating on Nortel today to Underperform from Neutral, and cut his price target to $7 from $8.50. He says the move “is triggered by a combination of increased caution regarding Nortel’s 2009 prospects, as well as realignment of our coverage cluster related to our recent upgrade of Motorola.” Arya notes that the Street’s 2009 estimates are not supported by the company’s deteriorating trends in deferred revenues and new orders.

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The global mobile handset market grew 15 percent in the second quarter to 297 million units, according to research firm Strategy Analytics.

Nokia (NOK) continued to dominate the market, with a 41.1-percent share, up from 40.9 percent in the first quarter, shipping 122 million phones. Samsung followed with a 15.4-percent share, with Motorola (MOT) holding onto the third spot at 9.5 percent, followed by LG at 9.3 percent and Sony Ericsson at 8.2 percent. The research firm noted that Apple (AAPL) had just 0.2 percent of the global market in the quarter, as it prepared for the launch of the iPhone 3G.

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Motorola (MOT) has reorganized its home and networks mobility unit into three units, in a move that could be a prelude to the sale of one or more of the pieces, The Wall Street Journal reports.

The Journal says the three divisions will include one focused on cable set-top boxes and related gear for digital video, Internet-based video and modems; a second, which sells cellular networking gear; and a third focused on next-generation networks, including WiMax and LTE.

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The Street is bracing for another grim quarter from Motorola (MOT) when the handset maker posts results on July 31.

Goldman Sachs’s Simona Jankowski this morning warned that the company is likely to miss consensus estimates for the quarter due to the continued weakness in its mobile devices business. Jankowski contends that handset unit sales likely declined again in the quarter on further market share losses; she also thinks that ASPs declined more than expected due to a more competitive environment, a less competitive product offering and a mix shift to the low end.

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In a few weeks, the Apple faithful and other gadget mavens will line up as part of the mad rush to be among the first to buy the new 3G iPhone on July 11. Contrast that with the rest of the wireless business, where once-hot device makers such as Motorola Inc. cannot even give away many of their products.

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Thing just keep getting worse for Motorola (MOT). Battered today by negative notes from several analysts, the stock is headed for its lowest close in 5 years. And it isn’t all the company’s fault: there are mounting concerns on the Street that expectations for the handset market in general for 2008 are simply too high.

Deutsche Bank’s Brian Modoff cut his 2008 unit forecast for the global handset market to 6.1% from 8.1%; he had entered the year expecting 11% growth. Modoff says that consumer globally are stretching out the replacement cycle, “holding off on purchases to pay for gas or food or the mortgage.”

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Motorola (MOT) shares continue to sink ever deeper into the mire.

The stock is getting whacked today, perhaps in part from some bearish commentary from the contract manufacturer Foxconn. According to Bloomberg, Foxconn Chairman Samuel Chin made some bearish comments following his company’s annual meeting today in Hong Kong.

Chin said that Motorola, Foxconn’s biggest customer in 2006, is still “having difficulties” and will “continue to impact” his company’s results. The story notes that Foxconn is seeking more business from Samsung and Nokia (NOK) to make up for the shrinking business from Motorola.

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Razr anyone? Motorola can’t even give those things away anymore. The once-proud company reported horrible earnings today, with sales down 21% and a net loss of $194 million. But the big takeaway was the 39% collapse in its mobile phone business. Mobile device revenues in the quarter dropped $2.1 billion compared to last year.

Coincidentally enough, that is almost exactly how much Apple made last quarter over the past three quarters on iPhone sales. That figure comes to $2.3 billion (including lumped-in sales of Apple TVs, which likely made up a very small portion of that total).

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