Motorola's Vertical Leap

Enterprise users are watching with growing anticipation to see what benefits the combination of Motorola Inc. (NYSE: MOT)'s broad cellphone offerings and advanced networking efforts with Symbol Technologies Inc. (NYSE: SBL)'s strong position in scanners, RFID readers, and ruggedized mobile computers might bring.

"It'll be a good thing for Symbol and its customers if they have the stability and the financial backing to continue doing the research and product-development that have made Symbol a successful company on the corporate side," notes Allan Chandler, director of technology at Alameda, Calif.-based Golden State Overnight. (See Shipper Transforms With Wireless.)

The deal, which is expected to close at the end of the year pending SEC and shareholder approval, would also give Motorola a direct line into the enterprise sector, where it's had mixed results. Despite big contracts with the U.S. Postal Service and Federal Express, Motorola's enterprise efforts have not produced the desired results to date.

"We really had our hearts set on adding lots of critical mass and critical size inside the enterprise area," Motorola chairman and CEO Ed Zander said in a conference call, "and today we do that."

While its recently released Razr and Q cell phones help Motorola maintain its hold on the No. 2 position in the consumer mobile phone market, "you can only sell so many MP3-playing cellphones to teenagers till you tap out that market," points out Carmi Levy, senior research analyst at Info-Tech Research Group .

"Clearly, what Motorola wants to do is drive its mobile products more deeply into specific verticals," continues Levy. "They want to go into retail, transportation, and healthcare -- three areas where Symbol has excelled."

In particular, the integration of Symbol's RFID technology with Motorola's broad mobile device offerings and its wireless broadband systems, including Canopy, could open the door to broad-scale enterprise applications heretofore not available from a single vendor.

"Symbol is already among the leaders in the RFID market, which is still in its infancy," points out Todd Kort, principal analyst for client computing at Gartner/Dataquest . "With Motorola behind them, the two companies together could help push that technology forward much faster."

Another opportunity for the combined Symbol-Motorola unit is in ruggedized mobile computers, an underserved market where Symbol has carved out a strong position. The power of Motorola's marketing muscle could help significantly expand that market, currently dominated by a few niche players.

Longer term, putting Motorola's wireless broadband capabilities on top of Symbol's vertical enterprise offerings raises an array of intriguing possibilities.

"A more tightly integrated set of mobile-device offerings raises the business potential for the network as well," explains Levy. "It gives potential clients more reason to buy in -- so they can do more with the fancy wireless network they just set up. That strengthens the business case for Motorola as well as for its potential clients." (See Zander Gets WiMaxcited.)

For the moment, however, the buyout simply gives existing enterprise customers a measure of reassurance that Symbol's well-publicized financial scandals will not affect its ability to support current product lines and bring new innovation to the market.

"If they get their investor and SEC challenges straightened out," adds GSO's Chandler, "so that the engineers can continue to do what they have done for the last 20 years -- come out with great products -- that would be the best outcome from a customer viewpoint."

— Richard Martin, Senior Editor, Unstrung