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Motorola to Sell Flat-Panel Televisions

Posted on: Wednesday, 15 October 2003, 06:00 CDT

Oct. 15--It's been nearly three decades since Motorola Inc. sold off its television manufacturing business, but now the big communications conglomerate wants back in the game.

Motorola is partnering with a Hong Kong company, Proview International Holdings Ltd., to produce a new line of flat-panel television sets and flat-screen computer displays that will be sold under the Motorola brand.

Motorola joins a growing parade of American companies that are putting their brands on Asian-manufactured consumer electronics products in the fast-growing, flat-screen TV market. For Motorola, however, the move is a shift from the company's tradition of producing and selling its own technology. The 75-year-old company, which invented the walkie-talkie and the cell phone industry, long has prided itself on its home-grown technology innovations.

Personal computer makers Gateway Inc., Dell Inc. and Hewlett-Packard Co. have jumped into the flat-panel TV business. Gateway began selling plasma TV monitors about a year ago and now claims to be the No. 1 seller in the United States. Dell and H-P recently said they plan to begin selling LCD TVs. All three will partner with Asian manufacturers rather than build the TVs themselves.

Proview, a major maker of consumer electronics in China, will do most of the heavy lifting for Motorola's TV business. It is responsible for manufacturing, marketing, distribution, warranty work and service.

Motorola is lending its brand name and reputation.

The products include plasma-screen television monitors, flat-screen LCD computer displays and automotive video play screens as well as DVD players and recorders.

The new consumer electronics products are being shown this week at a trade show in Shenzen, China, and will be sold in China late this year. A year from now, Motorola will announce its plans for a worldwide rollout in major retail stores.

Sales of flat-panel TVs are growing at about 200 percent annually, while computer monitor sales are climbing at 40 percent, according to Austin-based research firm DisplaySearch. That makes it one of the few markets in consumer electronics in which revenue is growing faster than shipments.

And profit margins of 10 percent or more by some estimates are very attractive to companies battling it out for the single-digit profit margins in the maturing businesses of personal computers and cell phones. The average prices also are rising, not falling, as demand grows for larger flat-panel TVs. "These advanced display products are a natural extension of our leadership in digital entertainment and information solutions," said John Burke, general manger of the broadband business, which includes Motorola's Connected Home lineup.

Motorola became a major maker of digital set-top television control boxes and cable modems in 2000, when it acquired General Instrument Corp.

"Motorola is as distinguished and trusted a name as there is in the electronics industry," said Proview Chairman Rowell Yang. "It is recognized as the world leader in every category in which it participates."

However, investment analysts are dubious of the wisdom of re-entering the hyper-competitive consumer electronics business.

"You have to ask the question: What competitive advantage can Motorola have that thousands of other TV makers don't have?" asked analyst Todd Bernier with Morningstar Inc. in Chicago. "The answer is nothing."

He noted that Motorola executives talked recently about refocusing the company on communications markets with the announced spinoff of the Austin-based semiconductor business, which is expected to take place next year.

"Moving into flat-panel displays is not refocusing," said Bernier, a longtime critic of the company.

Already fighting for its life against Nokia Corp. and others in the cell phone business, Motorola could be in for another brutal battle in TVs.

"It is going to be tough for them to go in and battle against the Sonys, the Samsungs and the Sharps of the world" in the TV business, said analyst Ren Zamora with Loop Capital Markets in Chicago.

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(c) 2003, Austin American-Statesman, Texas. Distributed by Knight Ridder/Tribune Business News.

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