The rise and fall of Motorola
Alphabet, the owner of Google, has become the first tech company to issue a 100-year bond since Motorola in 1997. So what happened to Motorola next? A family’s battle to save their legacy from hubris
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It was Michael Burry, the investor played by Christian Bale in The Big Short and famous for predicting the financial crisis, who took the opportunity to compare Alphabet to Motorola after it emerged this month that the owner of Google was issuing a 100-year bond.
Burry has been warning that we are in an AI bubble and saw the 100-year bond as an interesting reminder from history:
A company that has issued a 100-year bond means it has agreed to borrow money and pay it back over a century. You could read that either as a sign of hubris - the business is confident it will still be around in a century - or pessimism - the business feels it needs to spread repayment of debt over 100 years. Either way, it is a sign of strength. Only the biggest, most reliable companies can get lenders to agree to their debt being repaid over 100 years. This is why 100-year bonds are usually reserved for national governments and rare for businesses.
Motorola issued its $300 million (£222 million) bond in October 1997. The chief executive at the time was Christopher Galvin, the third generation of his family to run Motorola after Paul, his grandfather, who founded the company, and Bob, his father, who built it into a global powerhouse.
But Christopher Galvin would be the last member of his family to lead Motorola. Six years after the 100-year bond was issued, he was ousted by the company’s board. Motorola would never be the same again.
This is the story of what happened…
One small step
“It’s one small step for man, one giant leap for mankind.” Without Motorola the world would never have heard Neil Armstrong say these words or see him take his first steps on the moon in 1969. Motorola produced the transmitters and receivers that beamed this historic moment to Earth.
The company proudly promoted its role in the moon landing through an advert that simply stated: “Motorola was there.”
By this point, Motorola was established as a technological powerhouse in the US. Motorola had been founded by Paul Galvin and his brother Joseph in 1928 in Chicago as Galvin Manufacturing Corporation.
Before founding this business, Paul Galvin had already had two ventures go bankrupt. The lessons from these setbacks would be pivotal in shaping Motorola. Galvin was obsessed with constantly evolving the business and not being left behind by technology. Indeed, many years later, Christopher Galvin, his grandson, would say: “The company’s success was born of failures.” Given what would later happen to Motorola, this is particularly ironic.
Galvin Manufacturing Corporation started making battery eliminators - a power converter that allowed people to plug battery-powered radios into their household electricity. But it quickly moved into car radios. This is where the name Motorola comes from - it is a combination of the words “motor” and “victrola”, which is a record player. It then moved into two-way radio, walkie-talkies, televisions, and semiconductors.
In 1973 Motorola invented what we now recognise as the mobile phone. It started working on the technology after a request from the chief of police in Chicago, Orlando Wilson, according to a great piece on the history of Motorola by Chicago magazine. Wilson wanted a way to stay in contact with his patrol officers while they were out on the streets of Chicago trying to clamp down on violent crime.
Motorola developed a radio telephone system that meant multiple mobile phones could use the same radio frequency at the same time. Until this point, anyone with a mobile phone had to wait until a dial-tone or frequency became available because the system could only handle one call at a time. The company’s breakthrough was in developing the computer system and transmitters to make this possible.
The network and phone were first launched in 1973. A decade later, Motorola made it available for consumers. The DynaTAC was the world’s first commercially-available portable cellular phone. “Even rush hours are office hours,” Motorola proclaimed in adverts.
It was Bob Galvin who drove the company into mobile phones. He had succeeded his father Paul as chief executive in 1956. Paul Galvin sadly died shortly after in 1959. Bob Galvin would lead the business from 1956 until 1990, when he stood down as chairman.
Such was Motorola’s success during this period that it was one of the 18 companies that featured in Jim Collins’ legendary management book Built to Last which was first published in 1994. This book looked at how a tiny collection of businesses had been able to deliver stellar results over many decades. It also included Sony, Disney and Walmart.
This is what Collins wrote about Motorola:
“Ever wonder how companies like 3M and Motorola grew from small, innovative companies into large ones? Partly by practicing the discipline of removal… In a bold removal, Motorola jettisoned its television business at the height of its success in the 1960s. To fill the vacuum, it sought out exciting new fields, such as microprocessors and cellular communications. Instead of milking cash cows, Motorola slays them.”
Collins picked-out a quote from Bob Galvin to demonstrate Motorola’s approach of evolving but staying true to some core principles.
“Change unto itself is essential. But, taken alone: it is limited. Yes, renewal is change. It calls for ‘do differently.’ It is willing to replace and redo. But it also cherishes the proven basics.”
However, despite featuring in Built to Last, Motorola’s success would not last. It would go on to have the ignominy of featuring in a second Jim Collins book for the opposite reason.
From Chicago to Stoke-on-Trent
If Collins had known where to look, he could have found evidence of the mounting problems for Motorola in the 1990s. In fairness though, one example was thousands of miles away from the company’s home in Chicago.
In Stoke-on-Trent, England, a car dealer had become known as the “Motorola Man”. John Caudwell was obsessed with mobile phones and their potential. He had bought 26 Motorola phones for £1,350 and started trying to sell them on. It took him months, but eventually he sold them.
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