Motorola Has Its Work Cut Out for It
Jul 29, 2010 11:37 AM PT
At face value, Motorola turned in respectable second quarter earnings: It posted revenue of US$5.414 billion, which, although down slightly from the $5.497 billion realized the same period a year earlier, nonetheless beat analyst expectations of approximately $5.19 billion.
The company also posted mobile smartphone shipments of 2.7 million units in Q2, up from 2.3 million in the first quarter. Here, though, doubts begin to set in about Motorola's performance: Some analysts were expecting shipments of 3.1 million to 3.2 million. One firm, Reuters, had predicted 2.7 million -- which Motorola delivered.
The less-than-spectacular shipment numbers do raise questions, especially as Motorola prepares to divide its company into two divisions, with one focused on the sale of mobile consumer technology.
Motorola, after all, was revived from the brink of corporate death by its embrace of Android. Based on these numbers, is that success story premature?
Blockbusters and Flops
While more is always better, it is too soon to judge Motorola's smartphone strategy, said Allen Nogee, principal analyst at In-Stat.
"Motorola has been struggling for a while, and it will take some time for that to turn around completely," Nogee told the E-Commerce Times.
Its corporate realignment plan will take time to execute -- that will be another telling indicator for the company and one that won't be realized for some time, he added.
The success of its Droid has given Motorola a boost, but it is also working on developing several other Android phones, Nogee continued -- and another blockbuster success could also have a major impact on its fortunes.
The reverse is also true, Patrick Gilbert, president and CEO of 4SmartPhone, told the E-Commerce Times.
"Motorola has to be very careful with the hardware it develops -- it is still in a precarious position," he said.
The Backflip, for example, was a flop in Gilbert's view, and "the company can't afford too many of those mistakes."
If Motorola wants to bring its shipment numbers up, it has to focus on differentiating itself from other Android device makers, Azita Arvani of the Arvani Group, told the E-Commerce Times.
Right now, the company has received a boost from Verizon's promotion of the Droid and shortages of HTC Droid Incredible, neither of which are permanent conditions.
Motorola's initial bet on Android paid off, especially as it offered the first iPhone rival for Verizon, said Arvani. However, taking off-the-shelf software and hardware components -- Android and Qualcomm chips -- to make a smartphone to enable rapid deployment will only deliver so much market momentum.
"As of now, the differentiating pieces for Motorola include the MotoBlur software, which integrates social networking streams into phone functions," Arvani observed. "This is an interesting feature that is offered on some Motorola Android phones, but only highly valued by a certain demographic and certainly not unique to Motorola."
Other differentiators: Shop4Apps, Motorola's own app store, which is currently open for business only in a few Latin American countries; and the Push To Talk i1 phone, which runs on the dying iDEN network.
"Going forward, Motorola has to work real hard to find some way to differentiate its Android phones," commented Arvani. "HTC and Samsung are both very strong competitors."