The grandson also rises

Chris Galvin faced the prospect that Motorola, the firm his family founded, would not survive for another generation. This is the story of how he put the telecoms and technology group back on track
Click to follow
The Independent Online

It's hard to believe, but Chris Galvin, chairman and chief executive of Motorola, represents the third generation of Galvins to run the telecoms equipment and technology group. Family-run companies usually lose their edge in the second generation. By the third, they are sinking fast. For a while there, that seemed to be Motorola's destiny too, but after a prolonged spell in the doldrums, the company has lately come bouncing back as one of the icons of America's hi-tech revolution.

It's hard to believe, but Chris Galvin, chairman and chief executive of Motorola, represents the third generation of Galvins to run the telecoms equipment and technology group. Family-run companies usually lose their edge in the second generation. By the third, they are sinking fast. For a while there, that seemed to be Motorola's destiny too, but after a prolonged spell in the doldrums, the company has lately come bouncing back as one of the icons of America's hi-tech revolution.

In no small part, that's down to Mr Galvin's own determination. But then as the third generation, he's got one hell of a history of invention to live up to, and he wouldn't want to go down as the Galvin that messed up. Motorola is the company that pioneered the automobile radio and developed the world's first cellular phone network. It also provided the television transmission technology in 1969 to send Neil Armstrong's first words from the moon - "That's one small step for man, but one giant leap for mankind" - back to 700 million enthralled earth dwellers glued to their TV sets.

From his promotional centre high above the Telecom 99 trade show in Geneva, Mr Galvin, 49, is a man with a message: Motorola is back on track and is resuming its rightful place among the titans of America's new industrial revolution.

"The one thing that Motorola will never stop doing is taking thoughtful risks," he says. "Think about it. The company's origins were in someone taking the risk of saying that people would like to listen to news and music in their car. At the time, in the late 1920s, radio was defined as a home product only."

There are solid grounds for Mr Galvin's determined, if restrained, demeanour. Motorola's share price has doubled over the past year, and at $94 is near last month's all-time high. That values the semi-conductor, mobile phone and electronics solutions provider at $57bn (£36bn).

Yet just two years ago, many wondered whether Motorola would survive at all. The company seemed to be in too many markets with razor sharp competition, and seemed to have lost its traditional spark for innovation. Upstart competitors like Nokia, the Finnish mobile phone giant, had come from nowhere, first to catch, and then to surpass, an increasingly staid looking American counterpart based in the slumbering Chicago suburb of Schaumberg. All at sea and adrift, the company was also facing major problems with its Iridium satellite-based mobile phone network.

Iridium has since been placed in administrative receivership pending financial restructuring, and Motorola's exposure of $1.7bn has become more of an embarrassment than the financial catastrophe it might have been. Even so, Mr Galvin isn't prepared to throw in the towel on satellite-based mobile telephony just yet. "We continue to believe in the proposition of Iridium," he says. "Ninety per cent of the earth's geography isn't covered by wire or cellular networks. Every time Motorola or others have made it possible for a human being to communicate in a new place or new way there is an opportunity. We will invest in a viable plan that includes numerous other investors."

If Mr Galvin succeeds in saving Iridium, there could be a modest upside for Motorola. The company has a $2.8bn contract to operate the Iridium network for five years. "I like to describe Iridium as one of the real true technological marvels of the world," Mr Galvin says and he is insistent that its prospects will improve with greater investment in a direct sales force and better service integration with conventional GSM networks.

This isn't the first time that a Galvin has had to reassess some technological marvel that hasn't performed according to plan. Over the seven decades since the original Galvin Manufacturing Corporation was formed, the company has combined technological prowess, intelligent marketing and political finesse with an uncanny knack of anticipating the future. There was also, in the case of the founding brothers, Paul and Joseph Galvin, a sharp-eyed will to succeed. But along the way there have also been some heroic failures.

The Galvins were born in the central Illinois farming village of Harvard. In 1921, when they were in their 20s, they decided that automobiles and radio - then in their emergence as mass market consumer goods - promised to be growing markets for storage batteries. The first venture, the Stewart Battery Company, formed with a partner Ed Stewart, failed unceremoniously in 1923. Three years later, they rejoined Mr Stewart in a new business for manufacturing "battery eliminators" - a device that enabled battery-operated radios to be powered by household electrical current, in essence, an early version of the adaptor.

Their hunch that the several million owners of battery-powered radios would buy eliminators, rather than splash out for new, more expensive electric models, proved correct. But in 1928, defects in the eliminator, led creditors to liquidate the company, and the product design and equipment were put up for auction.

Oddly, that second failure proved a turning point. With an improved design, and strong indications that the mail order giant Sears Roebuck would carry the product in its catalogue, the brothers raised $1,000.

Come auction day, Paul outbid several competitors, bought the company back for $750 and expanded into making electric radios. Yet just as the business was getting on its feet, the October 1929 stock market crash unfolded. Radio, like the Internet today, had been the market's talisman. Small businesses like the Galvins' faced huge inventories of unsold products and stiff competition from bigger competitors dumped radios at below cost.

A visit to New York City several months later convinced Paul that car radios offered a new opportunity. He returned to a trade show in Atlantic City in 1930 with a prototype working model installed in his own Studebaker. The product attracted enough orders to show that the auto radio had a future. To suggest sound in motion, the brothers combined the word motor with the suffix ola - after their famous Victrola radio brand - in order to create the Motorola name.

What changed Motorola forever was the outbreak of the Second World War. Portable two-way radios for foot soldiers, tanks and bombers produced an insatiable demand for the company's leading edge radio technology.

Between 1941 and 1945, the number of employees jumped fourfold to exceed 3,000, while annual sales mushroomed from $10m in 1940 to more than $80m five years later.

In the 1950s, Motorola rode the television boom, manufacturing the first portable television sets, and also became the leading global supplier of home audio systems - products that were discontinued in 1970s as Japanese-made products swamped world consumer markets.

More importantly, Paul Galvin, now joined by his son, Bob, together with Paul Noble, their chief engineer, developed a research park that investigated the commercial potential of transistors, and the applicability of solid state electronics to Motorola's business.

From there, it was a natural progression into semi-conductors and the use of silicon, even though in these early days of the new technologies it was far from clear who would be the customer or what use they would find for the product.

Nevertheless, Bob Galvin, by now a vice president, told one memorable board meeting in the mid-1950s that the company was determined to move in that direction: "If you don't like my decision, you can get rid of me; but you can't change my decision."

The space race and the Cold War provided a backdrop of booming consumer and military spending. The same engines that launched Motorola, now pushed it outside of the US and around the world. Factories in North America, Asia and Europe proliferated, and new technologies like paging and then mobile telephony, both led by Motorola, were born. Increasingly, however, semi-conductors and then micro-processors came to the centre of the group's technical focus and sales growth. An important symbol of the changes took place in Britain. Just two years after opening a semi-conductor plant in East Kilbride, Scotland, Motorola in 1987 produced its last auto radio at its factory in Stotfold, Bedfordshire.

If the early move into chips and cellular phone technology proved prophetic, it also exposed Motorola to extreme competitive pressure from more tightly focused rivals like Nokia and Ericsson, on the one hand, and Texas Instruments, Japan's NEC and the Taiwanese semi-conductor sector on the other.

By the mid-1990s Motorola was floundering. Starry-eyed but uncommercial innovation had to start giving way to cost controls and streamlining. In 1998, Chris Galvin, now in charge, slashed the company's cost base, laying off thousands of its staff for only the second time ever in the company's history.

So far, more than a dozen subsidiaries have been sold and the company is now targeting two business areas: integrated communications solutions, including the mobile handset and infrastructure operations, and embedded electronics solutions.

"The old strategy was a product strategy, the new one is a solutions strategy," says Mr Galvin. "We're tailoring the solutions for the individual, the work team, the home and the car. When we look at the world, we say who is going to build the engines, who is going to make all this happen? It's the early chapter of a monstrous, huge opportunity and that's what gets us excited about semi-conductors and embedded electronics because somebody has got to make all this stuff work together."

Making the new digital age a practical, working reality led Motorola to partnerships with tech-sector specialists like SUN Networks, the server manufacturer, and Cisco Systems, the Internet hardware giant. "We've been making a lot of progress," says Mr Galvin. "Those things we promised to do - reorganise the company around solutions, target the higher growth segments of our industries, perform better from an execution and financial standpoint, I think that's happening." The recent launch of the Triband phone, which is light, stylish and easy to use, offers unique interoperability on Europe's GSM mobile networks, Japan's PCN system and on the various networks used in North America. Last month, Motorola created 1,000 jobs to add manufacturing lines for its newest mobile models at its Easter Inch plant in Bathgate, Scotland. It also agreed to supply Trafficmaster, the British road navigation system firm, with systems to deliver traffic information to car dashboard navigators through GSM mobile broadcasts.

The new partnerships, in the wake of the Iridium debacle, reflect an about face in the company's business model. "We think there are enough innovators, and there is enough capital available," Mr Galvin says. "So if we come up with something really interesting and new, the new business model would be able to deliver partners, carriers and customers to help found an industry rather than do it ourselves. That's the lesson learned from Iridium."

But aren't we in danger of being too plugged in and suffering from information overload? And if there's a backlash where will that leave Motorola?

His answer is immediate and direct. "Use the off button, that's the answer. If people think they're too connected they can just turn their phone, their pager or their telematics in the car, off. The fascinating thing is that they won't leave it off for very long. Most people can't live without being connected."