Subject: [NEXTEL-1] Motorola makes nice with Nextel

From: NEXTEL-1
Date: Mon, 28 Jun 2004 11:14:47 -0400

Motorola makes nice with Nextel
Zander aims to save a $2-billion relationship 

By Julie Johnsson
June 28, 2004

The first customer call Edward Zander made in January as the new CEO 
of Motorola Corp. was to the Schaumburg company's largest, and 
perhaps angriest, client: Timothy Donahue, CEO of Nextel 
Communications Inc.

"It was a defining moment for me in the company, just spending an 
hour with him," Mr. Zander told an investor group earlier this 
month. "Because he was nice, but after the niceness wore off — it was 
a hard trip back, a hard trip back."

Mr. Zander, known for charming key customers as president of Sun 
Microsystems Inc. in the 1990s, inherited a company renowned for 
treating clients cavalierly — none more so than Virginia-based 
Nextel, the nation's sixth-largest cellular phone operator.

With Nextel poised to end its dependence on Motorola as the sole 
supplier of its handsets and infrastructure gear, Mr. Zander is 
pulling out the stops to salvage a relationship that generates more 
than $2 billion in annual sales for Motorola.

In a shake-up, he has given Chief Information Officer Samir Desai 
overall responsibility for managing the Nextel account.

It's rare for a CIO at a Fortune 500 company to be given such an 
assignment; that's usually work for lower-ranking executives. It 
signals that Mr. Zander is serious about repairing frayed ties with a 
customer that has spent $15 billion on Motorola products over the 
past decade.

"That's not uncharacteristic for Zander, who's known for doing 
whatever it takes (to win customers)," says Christopher Foster, 
senior analyst with Network Business Quarterly, a New Hampshire-based 
market research firm.

Nextel's future spending at Motorola is almost certain to fall as the 
carrier adopts technology that would enable it to use competing 
vendors.

Mr. Desai's task is to position Motorola to supply some of the next-
generation network that eventually will replace iDEN, the walkie-
talkie technology that Motorola created for Nextel.

"We're working very closely with Nextel," Mr. Zander said at the 
investor meeting, a June 17 conference sponsored by San Francisco 
merchant bank Thomas Weisel Partners LLC. "Round one was iDEN. Tim 
and his team — hopefully we're working with them to build round two."

Loose ties

That's by no means assured. The two companies still don't have a long-
term contract (Crain's, April 12). After a five-year agreement 
expired in December, they operated without a contract for three 
months before agreeing to terms that last only through the end of 
this year.

Nextel, meanwhile, is testing next-generation wireless data networks 
that eventually could replace iDEN with three vendors: New Jersey's 
Flarion Technologies Inc. and California-based IP Wireless Inc. and 
Qualcomm Inc.

Flarion and IP Wireless are upstarts with ties to Motorola, and, if 
selected by Nextel, could turn to the Schaumburg company to 
manufacture their network equipment, analysts say. Motorola expects 
to create new handsets that will work on whichever network Nextel 
selects, a spokeswoman says.

But migrating from Motorola's proprietary iDEN network to technology 
with a broader user base will fundamentally alter the dynamics of 
this relationship. Nextel will be free to pursue deals for cell 
phones with whomever it chooses, forcing Motorola to compete for a 
customer that accounted for $1.46 billion, or 18%, of the company's 
handset sales in 2003.

A historical perspective

That's where the low-key Mr. Desai comes in. He was selected to be 
the electronic giant's ambassador to Nextel because he has ties with 
the carrier that date back to the 1990s, when he was a founding 
member of the Motorola team that created the carrier's signature 
walkie-talkie, a Motorola spokeswoman says. (Messrs. Desai and Zander 
weren't available for interviews.)

A person close to Nextel's senior management says that Mr. Desai is 
keeping channels of communication open and positive. That's a change 
from just a few months ago, he adds, when Nextel executives 
swore "they would do anything but purchase next-generation product 
from Motorola."

A Nextel spokeswoman declined to discuss Mr. Desai's influence on the 
companies' ties, adding: "There is strong momentum in this strategic 
relationship, as Motorola is our largest supplier and we are their 
largest global customer."

http://chicagobusiness.com/cgi-bin/news.pl?id=978

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