Push or play: Motorola's Plantation-based unit is the sole supplier of cell phones to Nextel, but a planned merger with Sprint could jeopardize that cozy relationship

South Florida CEO, March, 2005 by Jaclyn Alcantara

Motorola's Plantation-based unit faces an uncertain future now that cell phone service providers Sprint and Nextel plan to merge, possibly making much of the technology produced at the massive South Florida site obsolete.

The cell phone maker developed the proprietary iDEN push-to-talk platform used exclusively by Nextel. And though the proposed Sprint Nextel merger is not expected to close until late 2005, a new, more advanced technology called EVDO--being offered by cell phone carrier Verizon and soon to be adopted by Sprint--could force the iDEN technology to be phased out, analysts speculate.

"Eventually, iDEN technology will disappear," says Phillip Redman, a research vice president at Gartner Inc. "It may not be five years and it may not even be 10 years from now, [but] no major players [other than Nextel] are purchasing that equipment anymore."

Even so, most analysts do not expect an immediate impact on Motorola's 3,000 Plantation employees. Motorola's general manager of iDEN, Samir "Sam" T. Desai, sees the merger as an opportunity for his division to develop a phone that combines the two very different technologies used by Sprint and Nextel. For the short term, he may be right.

"You can't turn something off like that overnight," Redman says. "[iDEN is] still the best out there for push-to-talk."

Desai would not release financial data, but experts estimate that iDEN accounts for approximately 10 percent of Motorola's total revenue. Desai says a dual-mode phone combining Sprint's CDMA platform and iDEN's push-to-talk technology is currently being developed in Plantation. The phone could potentially be marketed to Sprint's 17 million and Nextel's 16 million customers. Desai adds that Motorola "has a wonderful relationship with Nextel management and we want to continue that relationship" once Sprint and Nextel merge.

Analyst Redman is not so sanguine: "I doubt that there's going to be a whole lot of integration between the two systems. It's not going to be a huge product." He notes that one of the main reasons for the Sprint Nextel merger was the expectation that the iDEN technology would not be scalable enough to support Nextel's growth--something experts say the EVDO technology would do because it is designed to allow fast, broadband wireless Internet access.

Julie Ask, research director with San Francisco-based Jupiter Research, says that within the next three to four years, "a lot of folks anticipate Nextel will scrap its plans to upgrade its network and will switch over to EVDO."

[ILLUSTRATION OMITTED]

Speculation that Sprint's rocky past with Motorola--the two companies had a rumored falling out over a cell phone supplier agreement several years ago--could also be a hurdle for the company.

"Sprint's open towards Motorola but they [Motorola] have got to put together a portfolio to meet their [Sprint's] needs," says Redman, who adds that in the past Motorola was slow to respond to Sprint's product demands.

Desai would only comment that in the past, "unfortunately, we didn't get a chance to fulfill [Sprint's] their requirements because of priorities. But now we'll be able to do that."

For the near future, Nextel is locked into a three-year contract it recently signed with Motorola to extend its iDEN infrastructure and subscriber supply agreements.

The most immediate impact of the Sprint Nextel merger on Motorola, Redman projects, will probably be a hold on any expansion plans for iDEN, including any incorporation of iDEN technology into devices Motorola delivers to the federal government--a market segment Motorola also serves from Plantation.

Analyst Ask says that no matter what the fate of iDEN may be, Motorola remains an important player in the telecommunications industry, and "consolidation is good for them. They'll have fewer products and more scale, so it's good for their business."