Walkie-Talkie Feature Could Strain Rivals' Business Relationship
For the decade that Nextel Communications Inc. and Motorola Inc. have been together, they've had a relationship worthy of envy.
But their longtime interdependence, from which both profited handsomely, is about to get a lot more complicated, analysts say. Motorola, in effect, wants to see other people.
When Nextel built its wireless network, it wove Motorola's technology into its very foundation. Their relationship was exclusive; Nextel bought and sold only Motorola technology. The fifth-largest wireless phone company in the United States became Motorola's biggest customer. In short, it was the closest thing to a merger without an actual merger; it was a symbiotic -- and lucrative -- relationship.
Such relationships are unusual in the business world, where most businesses have many suppliers.
Reston-based Nextel gets more than 95 percent of its handsets from Motorola. Last year, Nextel bought $225 million in Motorola goods. The year before, $290 million.
"They have a mutually dependent relationship," said Albert Lin, an analyst with American Technology Research Inc. of San Francisco. "Motorola owns essentially all of the technology patents used by Nextel," and Nextel controls 11.1 million users of Motorola technology, he said.
One product in particular made both of them famous: Nextel championed Motorola's two-way radio technology that works like a walkie talkie and sold like hotcakes to contractors, plumbers, electricians and emergency workers who use the phones to radio other Nextel users without having to dial an entire telephone number. More than 90 percent of Nextel subscribers use it and are willing to foot higher monthly bills for it.
But now, Motorola is developing a walkie-talkie technology it hopes to sell to Nextel competitors. Nextel, according to sources close to the company, is testing a new, more advanced network technology that could sever its long-standing ties to Motorola.
"They're tied at the hip. But they're both having to make business decisions" that could distance the two players and mark the end of an era, said Brian Modoff, an analyst with Deutsche Bank, which has provided investment banking services to Motorola.
Nextel and Motorola officials deny rumors of major changes between them.
"Those who make those presumptions are jumping to conclusions that are definitely wrong," said Audrey Schaefer, a spokeswoman for Nextel.
"Our relationship with Nextel has continually evolved as we have worked together over the last 10 years," said Leif G. Soderberg, Motorola's director of corporate strategy, responding to questions by e-mail.
"We expect that the relationship will continue to evolve as the market and technology environment changes."
But the latest brouhaha over Nextel's popular walkie-talkie feature has shed light on a sticky situation for both companies.
For the decade that Nextel Communications Inc. and Motorola Inc. have been together, they've had a relationship worthy of envy.
But their longtime interdependence, from which both profited handsomely, is about to get a lot more complicated, analysts say. Motorola, in effect, wants to see other people.
When Nextel built its wireless network, it wove Motorola's technology into its very foundation. Their relationship was exclusive; Nextel bought and sold only Motorola technology. The fifth-largest wireless phone company in the United States became Motorola's biggest customer. In short, it was the closest thing to a merger without an actual merger; it was a symbiotic -- and lucrative -- relationship.
Such relationships are unusual in the business world, where most businesses have many suppliers.
Reston-based Nextel gets more than 95 percent of its handsets from Motorola. Last year, Nextel bought $225 million in Motorola goods. The year before, $290 million.
"They have a mutually dependent relationship," said Albert Lin, an analyst with American Technology Research Inc. of San Francisco. "Motorola owns essentially all of the technology patents used by Nextel," and Nextel controls 11.1 million users of Motorola technology, he said.
One product in particular made both of them famous: Nextel championed Motorola's two-way radio technology that works like a walkie talkie and sold like hotcakes to contractors, plumbers, electricians and emergency workers who use the phones to radio other Nextel users without having to dial an entire telephone number. More than 90 percent of Nextel subscribers use it and are willing to foot higher monthly bills for it.
But now, Motorola is developing a walkie-talkie technology it hopes to sell to Nextel competitors. Nextel, according to sources close to the company, is testing a new, more advanced network technology that could sever its long-standing ties to Motorola.
"They're tied at the hip. But they're both having to make business decisions" that could distance the two players and mark the end of an era, said Brian Modoff, an analyst with Deutsche Bank, which has provided investment banking services to Motorola.
Nextel and Motorola officials deny rumors of major changes between them.
"Those who make those presumptions are jumping to conclusions that are definitely wrong," said Audrey Schaefer, a spokeswoman for Nextel.
"Our relationship with Nextel has continually evolved as we have worked together over the last 10 years," said Leif G. Soderberg, Motorola's director of corporate strategy, responding to questions by e-mail.
"We expect that the relationship will continue to evolve as the market and technology environment changes."
But the latest brouhaha over Nextel's popular walkie-talkie feature has shed light on a sticky situation for both companies.
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