Motorola co-CEO looks for handset upturn in Q2
Published: 3 March, 2009
Wall Street's favorite game may be predicting when the handset market bottoms out this year, but the main phonemakers have been staying cautiously tightlipped on the subject. Now Motorola, of all companies, has broken the silence and says it expects its cellphone business to start improving during the second quarter. Several analysts have been predicting a Q2 uptick for Nokia, and their opinions gained credibility on the comments by Motorola co-CEO Greg Brown - the thinking being, presumably, that if Moto can do it, anyone can.
Brown said, in an interview with the London Financial Times, that the device unit, which has been dragging down the group's performance for a string of quarters, should turn the corner in the second quarter, by reporting a lower operating loss than in Q1. Hardly time to get the champagne out perhaps, but he insisted Motorola had "established a path back to profitability" for the unit, which reported a $2.2bn operating loss in 2008. He added: "It would be our goal to ... narrow the operating losses going forward. If Q1 is awfully close to the bottom, I would then be expecting Q2 to be an improvement. That is our goal."
An improvement as early as Q2 would stem almost entirely from the recent cost cutting programs, since Motorola has launched few new phones in the past six months, and is waiting for organic growth to come from its much anticipated unveiling of Android smartphones in Q3. Motorola has set a target of reducing operating expenses this year by $1.5bn, with most of the cuts in the devices business.
The new handset strategy is focused on midrange phones, and on the Americas and parts of Asia, a narrowed scope that could push Motorola out of the top five, even if its new products are successful. However, Brown hinted that the company might expand its product mix once again, assuming its midrange devices perform well, and said it could be competitive again in high end smartphones, where it has few offerings and tiny market share compared to the other members of the big five, plus Apple and RIM.
Although last week's sale of the Good Technology mobile email unit revived speculation that Motorola would exit handsets altogether, Brown denied there were any plans to sell, shut down or merge the unit. Last month, Brown and co-CEO Sanjay Jha purchased additional Motorola stock in a gesture of confidence in the firm's survivability.
Last week, Credit Suisse said it believed Motorola's handset losses could have bottomed out.
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