Android or oblivion for Motorola
For the last two years, investors have been calling for Motorola to bring out some decent new phones. The calls turned to pleas on Tuesday after its bleak results and a weak outlook.
Analysts are calling Motorola’s promise to introduce advanced devices in time for the holiday season, based on Google’s Android operating system, as the company’s last chance. In a research report entitled “Last Hurrah” Nomura analyst Richard Windsor put it bluntly:
I think if Android fails to deliver the needed revenue and profit recovery, then the focus will be oriented on managing the business for oblivion.
Motorola Co-CEO Sanjay Jha said the company will make fewer devices this year and instead put efforts into getting multiple Android products to market by the end of the third quarter and the start of the fourth quarter.
In the meantime the company is planning for a toned-down display at Mobile World Congress, the annual wireless trade show held in Barcelona later this month. All units – mobile devices, home and networks and enterprise mobility – will have a presence. Spokeswoman Jennifer Erickson said “We do have a Motorola booth there. It may be a little different and more focussed on customer meetings.”
The company is also narrowing its focus to the Americas and China, and zoning in on mid-tier ($50 to $200) data-centric devices with an emphasis on data services and social networking as well as higher-end devices. This means that devices cheaper than $50, a big chunk of the market, will take a back seat. Jha’s rationale is that carriers, looking for a shot in the arm of their own, would be more ready to subsidize fancier cellphones that they see helping to boost data revenue.
Motorola’s market share has fallen to 6.4 percent in the fourth quarter from 18.4 percent in Q1 of 2007 and more than 20 percent at its peak when demand for Razr was strong. Goldman analyst Simona Jankowski said it makes sense to refocus even though it makes it very difficult for Motorola “to go back to where they were” in terms of market share.
“They have to be good at something even though it’s small as opposed to being mediocre at a lot of things,” she said.
(Reuters photos: Motorola Renew phone, setting up its stand at CES 2007)