Motorola could target Android at midmarket to boost share

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Motorola could target Android at midmarket to boost share

By CAROLINE GABRIEL

Published: 1 July, 2009

READ MORE: Motorola

Motorola is set to announce its first Android handsets as early as September, and these are eagerly awaited, given that they are critical to deciding whether or not the firm can survive as a tier one phonemaker. Initially at least, it may be targeting the midrange webphone market rather than taking on LG and Palm at the high end of the smartphone range.

This would make sense for many reasons, apart from one that is important (as Palm and Apple have shown) to the US market watchers - making a PR splash with a superphone. That aside, though, the smartphone category is being morphed rapidly into a mass market internet device, and there should be opportunities for Motorola to boost its ailing market share by targeting midrange consumers and some emerging markets. This would see it looking to territories where it has traditionally done well, rather than taking on the European majors head-on, and avoiding the huge stress on its design and marketing capabilities that a direct challenge to Apple would involve.

That may come later, but for now Motorola is indicating it will play to Android's natural strengths in the mass market. The lower margins of this segment could be offset by the free nature of Android, while the phones would still drive heavier use of mobile internet and data as these behaviors spread through the population (as the midrange Samsung Instinct has demonstrated in the US).

There is plenty of analyst support for this view. In a research note, Michael Mahoney of Falcon Point Capital said Motorola would avoid the mistake it made with its once iconic RAZR, of being too reliant on one device, and would create a broader portfolio largely geared to the midmarket. And Avian Securities analyst Matt Thornton told BusinessWeek: "There's a lot of competition in the high end category and not a big movement to address the lower price points. It's a smart move. Motorola needs to be more near term and start making some money."

Barclays Capital analyst Jeff Kvaal is looking for two initial launches - one relatively high end, but positioned below the Palm Pre or LG Arena, and priced around $500; the other around $300 and geared to the midrange. Such levels would increase Motorola's average selling price to $147, from $123 in the first quarter of this year, while being sufficiently mass market to boost market share going forward. Moderate success could see unit volumes increasing by 20% to about 70m units in 2010, estimates Kvaal.

According to a recent report in The Wall Street Journal, T-Mobile USA and Verizon Wireless will launch Motorola Android phones before the end of the year and in April, co-CEO Sanjay Jha said the vendor would launch multiple Android phones before year end, and was "in detailed discussion with multiple carriers around the world .... It won't be one carrier in one region. It will be multiple carriers in multiple regions."