Motorola joins flat-screen TV business

A Motorola spokeswoman said its partner in the deal, Hong Kong-listed Proview International Holdings Ltd.  , would make the products, which would be sold in China before being launched globally under the Motorola brand.

“Our consumer research tells us that we have a brand that is very valuable, and that consumers would be keen to buy other products beyond the core products,” Shelagh Lester-Smith told Reuters on Tuesday.

“It’s a natural extension for us to want to offer an augmented consumer experience in the home.”

Some analysts wonder whether this is part of a broader strategy by Motorola or simply a one-off opportunity to leverage the company’s brand, especially in China.

Motorola used to make televisions under such brands as Quasar, but it sold the business to Japan’s Matsushita Electric Industrial Co. almost three decades ago.

“For the moment, TV manufacturers are making money on flat-screen TVs, but if it’s that easy for Motorola to jump into that market you have to wonder what the competitive advantage is,” said Sanford Bernstein analyst Paul Sagawa, who has an “underperform” rating on Motorola’s stock.

Others believe the strategy could pay off.

The move could be a hedge by Motorola in case digital set-top boxes, which it manufactures, are integrated into TVs in the future, said Shawn Campbell, a principal with Chicago-based Campbell Asset Management, which owns Motorola preferred shares.

Motorola, the world’s second-largest mobile phone maker, plans to make TVs, computer screens and DVD players for shipment to stores in China by the end of 2003, Lester-Smith said. Proview is one of the world’s top five display makers.

Motorola, struggling to hold its leading position in China’s cutthroat mobile phone sector, did not give any details on product pricing or expected unit shipments.

Its China operations contributed $5.7 billion of last year’s $27.3 billion in global sales.

STRATEGY CHANGE

The Schaumburg, Illinois-based company beat expectations on Monday by posting a quarterly profit that was twice Wall Street’s estimates due to strong demand for its cell phones.

The company said last week it would spin off its semiconductor unit into a separate company as it focuses more closely on its battle with Finland’s Nokia  , the world’s biggest phone maker.

That announcement came just two weeks after Motorola Chairman and Chief Executive Christopher Galvin’s announcement he would resign following clashes with the board over strategy. Galvin will exit when a successor is named.

Analysts said it makes sense to start the venture in China, where Motorola has a strong manufacturing and marketing position that could offer opportunities to cut costs.

China’s digital TV market is expected to grow to $60 billion by 2015 from $4.8 billion in 2002, state media have said.

Despite hefty price tags compared to their traditional boxy cousins, flat-panel TVs are widely expected to be a big earner for electronics makers worldwide. Such TVs currently retail for thousands of dollars.

Analysts expected global demand for liquid crystal display (LCD) TVs to hit 31.9 million units by 2007, compared with 1.7 million units in 2002.

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