Companies in the midst of substantive change look like extreme makeovers gone bad. Substantive change is a term I occasionally use to describe corporate restructurings; it’s less frightening them the term restructuring.
As most investors are discovering, corporate restructurings are not just about fixing up a balance sheet, corporate restructurings entail actually physically changing the company and all that goes with it including changing the company’s business focus. I bring this up because what we are seeing Motorola going through is not a pretty sight. However, I need to let investors know that restructurings as intense as Motorola’s are not comfortable sights to watch.
Remember that old adage: “Watching laws being made is like watching sausages being made. You might like the results but you can’t stand watching the process of producing it.” Some say that restructuring companies is like watching sausages being made.
Funny thing is I like watching sausage being made. It is not that bad if you can keep your wits about yourself. Hence, Motorola’s situation can be ingested and understood if you keep your wits about yourself.
I can take potshots at Motorola but that is not going to be helpful. The company is aware of its past failings. However, we need to review the bad stuff in order to understand why and how the company got where it is. Often a review of the company in total can give a restructuring professional insight into what ought to be done.
The easy and first recommendations made (by advisors) to a company in distress (you don’t need to be in Chapter 11 to be in distress) are:
• Stop all new capital expenditures• Cancel all future plans for growth• Reduce operational expenditures• Identify potential candidates for job layoff• Compile an up to date accounts payable• Compile an up to date accounts receivable• Compile a list of all secured creditors• Compile a list of all unsecured creditors• Compile a list of all major equity holders – even though you are in Chapter 11 some equity holders can be trouble
That is all the easy stuff.
What we are looking at with Motorola now is the hard stuff, which includes:
• Establishing a new business plan – this is the key piece; I call “what I want to be when I grow up”.• Establishing a new strategic plan• Establishing a new tactical plan• Identifying employees to retain while firing employees whom you feel you don’t need• Calming existing carrier customers• Finding new carrier customers• Resource reviews• Identifying strategic partners – because you lack resources• Developing joint venture relationship – because you lack resources• Integrating the old and new pieces of the company• Calming the public markets – Wall Street• Doing all of this with limited access to cash and credit
This is not a pretty sight. Many investors have no patience or understanding of what is going on. Many analysts have given up on Motorola; they just won’t say they have; they simply opine on what appears to be an impossibly difficult set of circumstances.
Frankly I understand everyone’s fear. Here are my thoughts. The Motorola I first encountered disappeared 25 years ago when they started making switching systems and other fixed network infrastructure. Frankly the best switches they made supported AMPS and N-AMPS. In my opinion after that it was downhill. However, they made great radios.
Organizationally, the company had been known to be a set of disconnected departments that often worked against each other. In other words, management integration has always been a challenge for this company