Libertyville-based Motorola Mobility determined to compete

Two days before Motorola Mobility Holdings Inc. planned to ship its Droid phone, Chief Executive Officer Sanjay Jha got a call from his lieutenant, Iqbal Arshad. There was a glitch in the software. Arshad wanted to rewrite the code before the phone went out the door.

“In big companies, you tend not to make those kind of changes,” said Arshad. “They're kind of scary.”

Not at this Motorola. Engineers ordered pizzas at the Libertyville headquarters and the lactose-intolerant Arshad nibbled on crusts. They worked through the night to fix the glitch, which involved a faulty battery reading, finishing at 4 a.m. The Droid shipped on time and became a top seller.

If this push for perfection sounds a bit like Steve Jobs's Apple Inc., there's a reason. Jha, 48, is determined to show that Motorola, a company that lost more than $4 billion in the last three years, can compete in a changing world of computing.

Step one is the Atrix 4G. Jha says mobile phones, rather than complementing a laptop or desktop, will displace them as the primary computing device for most people. He says the phone will trump tablets too, whether Apple's iPad or his own Xoom.

“This is the computer that I carry with me at all times,” he said in an interview, brandishing an Atrix. “If there is one bet we're making going forward, that's the core of it.”

The Atrix, which went on sale in the U.S. in February, runs on Google's Android software and plugs into what Motorola calls a lapdock, a keyboard-screen console similar to a thin laptop. The phone becomes the brains for a computer.

“With this, everything is in my pocket,” said Jha. “All the data, all the processing.”

The Atrix, sold with the dock for $499 from AT&T Inc., became the top-selling mobile phone at Amazon.com Inc. earlier this month. It's the first of a set of products that blur the lines between phones and computers. There may be screens that link to phones over Bluetooth wireless technology or keyboards projected onto a table with light.

The company is pushing similar innovations for phones aimed at business, social networking and entertainment, and at different markets. As part of its effort in China, Motorola is considering operating systems in addition to Android, including software from Baidu Inc., Google's Chinese rival, Jha said.

Skeptics abound. Rod Hall, an analyst with JPMorgan Chase & Co., says it will be difficult for Motorola to distinguish itself from other companies that use Android, such as HTC Corp. and Samsung Electronics Co., much less Apple.

“Atrix is a really cool idea, but I'm not sure others won't be able to replicate Motorola's moves,” said the San Francisco-based Hall, who rates the stock “underweight.” “Android is a commodity platform and to compete you need scale. They clearly don't have it now.”

Motorola, after pioneering mobile-phone technology in the 1980s and 1990s, fell to 2.4 percent the market last year, from 21.9 percent in the second quarter of 2006, according to researcher Gartner Inc. Motorola Mobility, made up of the mobile-phone and set-top box businesses, was spun off from what is now Motorola Solutions Inc. after billionaire investor Carl Icahn pressed for a split to improve its performance.

Motorola Mobility's stock rose 31 cents to $26.04 in New York Stock Exchange trading yesterday and has dropped 21 percent since the January spinoff.

“Motorola is now a better-tuned, better-oiled machine that produces good products consistently,” said Nirav Parikh, senior vice president at Los Angeles-based TCW Group Inc., which manages about $115 billion and is the ninth-largest investor.

Jha's lieutenants are a mix of veterans and outsiders. He hired Bill Ogle, who trained at Procter & Gamble Co., to head marketing, and Fei Liu, who ran an equipment company in China, to lead Motorola's effort there. John Bucher, a former Marine, was promoted to oversee strategy, and Christy Wyatt, who joined from Apple before Jha took over, manages software.

In Ogle's office, mounted above shelves lined with old Motorola phones, is a flat-screen Sharp television tuned to a live Twitter feed of posts about the company. He uses it to see how customers react to products like the Xoom in real time.

Ogle, 43, and his team just finished a two-month study of how people in the U.S. and China use phones and how the devices could do more. He pulled out a piece of paper with “points of pain,” a P&G expression for things people find frustrating. There were 38, in three categories: social connections, entertainment and productivity, both professional and personal.

“Imagine if your phone is your alarm, and when it goes off, it'll shine a light up onto your ceiling with the time and the first two things you need to do,” he said. “How about a Bluetooth earpiece that monitors your blood pressure?”

Ogle wouldn't say which, if any of these ideas, Motorola is working on. The point, he said, is that his marketing team passes these kinds of insights to Motorola engineers, to help lift the success rate of new phones.

“We're trying to move from random acts of brilliance to more consistent acts of brilliance,” he said.

Wyatt, 39, helps turn ideas into products. Her group developed Motoblur software, which combines e-mails and posts from social networks such as Facebook Inc. into one feed, and is working on making it easier to transfer content from phones to tablets to set-top boxes. Her latest push is to make Motorola phones more suited for corporate customers, taking aim at BlackBerry maker Research In Motion Ltd. in a market where an Android-powered device has yet to score a hit.

“In terms of investment, that's the biggest,” said Wyatt. “There is a ton of opportunity in enterprise.”

The Droid Pro, introduced last year, is tailored for the market, with a tactile keypad similar to RIM's BlackBerry. Motorola acquired Three Laws Mobility last year to bring more security to Android phones, by allowing companies to locate lost devices or wipe them clean of data.

The person tying these efforts together is Jha, said Chief Financial Officer Marc Rothman.

Brought in from chipmaker Qualcomm Inc. in 2008, Jha shuttles between Libertyville, Sunnyvale, California, and his home in San Diego, where Qualcomm is based. He can hold meetings until 11:30 p.m. and regularly sleeps five hours a night.

“His fingerprint is on everything we do,” said Rothman, who helped convince Motorola's board to hire Jha.

With a doctorate in electrical engineering and 14 years at Qualcomm, Jha prods engineers about chip design or the milliamps of battery drain when a phone is on standby, said Juergen Stark, chief operating officer of the mobile devices unit.

“The level of product involvement went up significantly when Sanjay joined,” he said.

Jha's challenge is to distinguish Motorola from companies such as Samsung and HTC that also use Android, available for free from Google. Yet Motorola's strategy risks alienating Google. As Jha strives to make devices stand out, they variations threaten to splinter the platform, said Jonathan Yarmis, an independent technology consultant.

Programs like games and productivity apps are created by independent developers. While they can create one that will run across Apple devices, they face a rising number of Android phones and tablets, which complicates the work and cuts profit.

Motorola may begin making phones with other operating systems, in addition to Android. The company is considering Baidu and software called Wophone from China Unicom (Hong Kong) Ltd., said Jha.

“We are in conversations, we are absolutely talking to Baidu,” he said.

Baidu and Google have clashed in China, where the Beijing- based company holds more than 75 percent of the online search ad market, according to researcher Analysys International.

Motorola may also develop its own platform at some point, though only with broad scale and developer support, said Jha.

“I would always consider it,” he said. “But I don't think it's the pragmatic thing to do right now.”

Jha said Motorola is very focused on Android for now and the partnership with Google is strong. Motorola employees have badges to Google offices and work there regularly on Android. Either Jha or Wyatt makes a weekly trip to the Googleplex in Mountain View, California to stay on top of development.

John Lagerling, who heads Android partnerships at Google, also said the relationship is strong.

With the progress Jha and his team have made, Motorola is expected to return to profitability this year, as revenue climbs 16 percent to $13.3 billion, according to a Bloomberg analyst survey. Still, Jha said the slump is never far from mind as Motorola tries to prove it can once again compete with the industry's strongest players.

“We've all lived through what I'd call a near-fatal experience,” said Jha. Now “we have the sense we can do it.”