Videocon looks to buy Motorola handset biz to derive telecom synergy
Videocon Group is doing what it knows best, buying out global electronic giants. After Thomson, Electrolux and a failed Daewoo attempt, it is now eyeing world’s third largest mobile maker (after Nokia and Samsung) Motorola’s handset business.
Motorola a week back had decided to dispose its loss making handset division as its flagship Razr model has been losing sales to Apple’s iPhone, RIM’s Blackberry and Samsung’s BlackJack.
But for Videocon, the deal may mean that it gets to expand its value chain since it already retails consumer durables and has acquired licence to offer mobile phone service in 22 circles through its subsidiary Datacom.
Videocon also has a retail network of 1000 shops through Next and recently acquired Planet M stores.
With India expected to become second biggest wireless market in world, Videocon can expect to win substantial number of customers.
As per Merrill Lynch valuations, Motorola’s handset business may be worth about $3.8 billion which is more than twice the market value of Videocon Industries Ltd. With stock market witnessing a bearish phase, it will be difficult for Videocon to get appropriate funding for the deal.
Videocon also lacks in having expertise in mobile phone software which is much needed for bringing the Motorola’s handset business back to profitability.
If indeed the deal materialises, due to growing financial constraints, it may not go down well for Videocon’s share price as has been recently witnessed in Tata Motors and Jaguar-Land Rover deal.
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Videocon with its strong distribution network will help the company get market share in short time. If this acquisition, goes through, will give a boost to Videocon’s plans to become a pan-India player.
I think that the value of $3.8 billion for Motorola handset business in current situation on world financial markets and especially in Motorola’s handset competitive position among Mobile phone producers is highly overvalued.
Motorola handset division is well known for its constant profit making problems.
Obviously, the company lacks a strong, dedicated leadership and new fresh ideas of what to do with its, otherwise very good and fashionable products.
Well, that’s an opportunity for a prospective buyer, but not at any cost.
p.s.
Motorola handset division was just one among many of Motorola’s conglomerate businesses…so we could say the company ‘lost its eye on its ball’, as famous property tycoon Donald Trump, once said
Update about Motorola mobile:
The company is laying off 2600 more workers, which means more than 10.000 employee cuts, since last year. Al together, that means cut of more than 10% of workforce.