Motorola Retools its Business Plan, Some Mobile Vendors Still Healthy

Motorola Corp. announced a significant drop in third quarter revenue and earnings, as well as the need to cut more personnel. Elsewhere, new reports demonstrate how wireless vendor growth is fueled by the data plans accompanying new smartphones and how some handset manufacturers continue to thrive.

Focal Points:

• Times continue to get tougher on a company that has seen its fair share of problems – Motorola. Revenues dropped to $7.48 billion from $8.81 billion for the quarter ending September 27, with net income taking a nose dive from a $60 million profit to a $397 million loss. Accordingly, the company must delay its previously announced plans to spin off its handheld device as sales fell 30 percent compared with the same quarter last year. Though it has already cut an estimated 4,800 jobs this year, the company expects to shed between 3,000 and 5,000 more on its return to health. Many of those cuts will come from the company's mobile phone division, as Motorola announced it will be abandoning several device platforms to concentrate on developing for Google Inc.'s Android platform. The first Motorola phones based on Android are expected to appear in time for next year's holiday season.
• While Motorola's sales are down and other companies are enduring similarly hard times thanks to the economic downturn, wireless carriers including AT&T Wireless and Verizon Wireless are reporting strong numbers. The carriers report that much of their success is due to the interest in smartphone devices that require data plans in addition to voice plans; thus helping to raise the average revenue per user (ARPU) significantly. AT&T reports its biggest subscriber gain ever this quarter, with 1.7 million new customers added. This is a 40 percent gain according to the company, of which almost 1 million customers were new Apple, Inc. iPhone subscribers. Verizon reports that almost 30 percent of its new customers were attracted by its rich smartphone device selection, having grown its revenue to $1.67 billion up from $1.27 billion last year.
• Handset device makers are reporting strong sales this quarter, with device shipments reaching 299 million in worldwide sales according to recent reports. While Research in Motion, Ltd. and Apple are enjoying the greatest growth rates, Nokia Corp. continues to dominate worldwide with a total of 117.8 million handsets sold. Motorola's sales continue to dwindle as its place has dropped from third to fourth, while Korean manufacturers Samsung Group and LG Electronics build strength.

Experton Group believes Motorola has an uphill battle trying to climb out of the ditch it has put itself in, but feels its intent to focus on the growing smartphone space is one of promise and peril for the company. The manufacturer's greatest successes to date have been in the voice phone space rather than the smartphone area, and while the future of the market is heading in the smartphone direction, the company has little success upon which to rely. Organizing itself singularly around the Android platform is a risky proposition and may bear only limited fruit. Meanwhile its competitors remain on a roll and continue to gain strength, as do carriers that are able to leverage the growing smartphone market. IT executives should work with preferred providers to ensure that current and future generations of smartphones can be leveraged effectively and globally within the enterprise without compromising security and stability.