Sometimes when a company goes in the red, its investors, its debtors and its stakeholders fail to recognize their sunk costs.  This might happen due to pride or to save face or to save their job or position or their clients.

I’m not talking about a ponzi scheme, I’m referring to situations that can include vendor financing or a bank bail out or even a hostile take over.

Motorola lost its way in the 1990’s.  Some claim that it never earned its way in the first place and that its resulting fall in late 1999 and early 2000 was less the result of the Internet Bust and more the result of the rest of the world learning that they couldn’t deliver on their promises.

Some might argue that Motorola made so many promises that they fooled themselves out of business.  They forgot that they were good at manufacturing.  Motorola got caught up in the ‘information technology’ boom and thought the future was in inventing and engingeering new products.

But all those products need to be manufactured and sold by someone.  Motorola sold off their manufacturing capability and became reliant on outsourced partners.  They did this in 2000 and 2001 under file fire sale conditions.  They ended up giving up a great deal of intellectual property and knowledge along the way too.

Since that time they have underperformed the major stock indexes.  Underperform is still better than going out of business. 

The question becomes why have they been able to continue?

They have underperformed but they have kept up with the growth rates.  That is somewhat surprising and speaks to some ‘heroic’ efforts by a cadre of Motorola employees attempting to save the company.

A company can only underperform for so long before they go bust or get purchased.  If you have bet on Motorola over the last seven years, you should be ashamed of yourself, šŸ™‚ for betting.  Investors still holding Motorola are making a mistake.

This company has lost its way, they have lost their identity and they have lost the ability to be honest with themselves about the big picture. 

Who is propping up this company?

That begs the question who is funding this pending train wreck?  Is it their vendors, is it their investors, bankers, pension fund holders or hedge fund managers? 

I don’t have the answer for that but they are about to get tested.  The ITC has ruled that Qualcomm’s chips are to be banned.  Motorola was counting on those chips to run the Razr 2. 

No Razr 2 success and Motorola might miss the 3G run that every other mobile phone maker has been preparing for since Motorola first started running into problems in 2000.

Next week gamblers betting on Motorola may have their bet called and they may be forced to decide on going ‘All In’.  Would you bet the farm on Motorola after 7 years of poor performance?

The ruling next week could prove to be very difficult for Motorola’s future, but if gamblers fail to bet the farm next week a shake up in Motorola could happen much much faster.

Motorola may not survive long enough to see the ‘Grinch steal Christmas Phones‘.