Motorola running out of time to survive in handset market

MOST READ
LATEST NEWS

Compare broadband and
mobile phone deals at Top10.com

EVENTS

4G World 2010 October 18 - 21, Chicago

4GWE Conference, Oct 4-6, Los Angeles

The Location Business Summit USA, 14-15 September, Crowne Plaza, San Jose

Advertize your telecoms job

JOBS

Mobile Industry & Technology Journalist - freelance

HOT TOPICS

Motorola running out of time to survive in handset market

By CAROLINE GABRIEL

Published: 4 February, 2009

READ MORE: Motorola | Handset

Even larger question marks hang over Motorola's ability to survive in the handset business, as the company turned in the expected poor quarterly results, with a $3.6bn loss and with dire mobile phone performance dragging down its other two, fairly robust, units. The company warned it would be well into 2010 before it could expect a turnaround in its devices unit, and many believe that it cannot wait that long.

The company's handset division was usurped in Q4 as Motorola's largest sales generator, turning in sales that crashed by 51% year-on-year, to $2.35bn, with an operating loss of $595m. By contrast, the Enterprise Mobility segment saw Q4 sales rise 4% to $2.2bn with operating earnings up 3% to $466m; and the Home and Networks Mobility business overtook handsets as the largest unit, with sales of $2.6bn, down 5% on last year, but an increase in operating earnings from $192m to $257m, and an improved margin (from 7% to almost 10%). This strong performance was credited in part to Motorola's market leadership in Mobile WiMAX, with major customers like Clearwire and Wateen Telecom of Pakistan starting to generate serious revenues; and also major 2G wins in China and other developing markets.

All this was firmly overshadowed by the continuing crisis in handsets, however, and the less significant this unit becomes to Motorola's overall sales balance, the easier it is to imagine the company being forced to exit the market altogether, even through a fire sale to an emerging market phonemaker. The division shipped 19.2m devices in the fourth quarter, down from 25.4m in Q3 and less than half of the 40.9m figure of a year earlier. Motorola estimates its market share at 6.5% for Q4.

To turn round the handset operation, Motorola is sticking to its strategy of radically paring down its handset range, focusing mainly on the launch of Android smartphones geared to Web 2.0 services later this year, and defocusing on the low end handsets that used to underpin its former second place in market share, but which were also the main catalyst for its downfall, when it raced over-eagerly into the ultra-low cost (and ultra-low margin) segment. Despite recent cutbacks in its Windows Mobile team, Motorola says it will still produce new Microsoft-based products for the enterprise, and will support Windows Mobile 7, though not until 2010. It also retains its own Linux P2K for selected emerging market lines, mainly for China.

The tone of the analyst briefings by co-CEO and handset chief Sanjay Jha is different from that of even a quarter ago - focusing on making the most of severely diminished opportunities, rather than on aggressive turnaround or any return to former glories. BusinessWeek is already dismissing Motorola has becoming a "peripheral player" in handsets.

And the timing is getting very tight. While Jha gives fairly convincing accounts of how Motorola will be able to differentiate from other Android lines through its expertise with Java and close cooperation with software companies like the social networking giants, the timescale for launch seems to have shifted back to the fourth quarter, which leaves Motorola without major new products for most of this year, and so presumably with ever diminishing device revenues and market share.

Pages: 1 | 2