Retailers Hanging Up on Motorola’s Quota Call

When Motorola Inc. executives asked Robert Qureshi to meet in a side room at a Dallas cellular telephone conference this spring, he thought they wanted his opinion on a new distribution policy.

Instead, they told him at least three-quarters of the cellular phones he carries in his 50 stores must be made by Motorola. If he didn’t meet that quota, Motorola wouldn’t supply him with its hot new products, including StarTac, the sleek model that’s wowing customers.

“I thought they were crazy,” said Qureshi, president of Cellular Concepts, a cellular phone retailer. “This is going to drive Motorola’s market share into the toilet.”

Qureshi’s not the only one who’s concerned. Other retailers are bristling at what they call Motorola’s strong-arm tactics as it tries to boost its slumping market share. They say the strategy is backfiring, tempting vendors to turn to competitors and further eroding Motorola’s position as the world’s No. 1 cell phone maker.

“There are other good phones out there,” said Ujjal Kohli, vice president of marketing at AirTouch Cellular Inc., which offers cellular service using Motorola phones, among others.

In the last half of 1994, Schaumburg, Ill.-based Motorola had an average of 63% of the U.S. cell phone market, said Herschel Shosteck, president of Herschel Shosteck Associates, a market research firm in Wheaton, Md.

Motorola now has less than half, Shosteck said. Meanwhile, its stock price has fallen 9% this year, to $51.625 on the NYSE on Friday.

Carriers and retailers are tussling with Motorola over the new policy, which involves designating certain retailers as “signature” customers. Signature retailers must promise that 75% or more of their phones will be Motorola’s, or they don’t get the company’s $1,000 StarTac, the world’s smallest cell phone.

“I want to have a good relationship with all my vendors, but I refuse to distribute under Motorola’s current terms,” said Cynthia White, chief operating officer of Bell Atlantic Nynex Mobile, the nation’s No. 3 cellular provider.

GTE Corp., the nation’s largest local phone company, and BellSouth Corp. already have felt Motorola’s sting. The company cut off GTE from StarTacs because GTE sold phones to distributors outside its region, another violation of Motorola’s policy. BellSouth has opted not to buy StarTacs rather than live under the constraints.