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Comment: Motorola struggles to overcome market woes

Posted: 04 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:mobile? handset? 3G?

Motorola's dreadful Q3 results and expected retreat from the European and parts of Asian regions are only part of the bad news from the ailing firm.

At the same time, the delay of plans to divest the mobile handsets division is just facing up to the realities of the bad state of this group and the economic situation.

Q3 revenues came in some 4 percent below most analysts' expectations as more market share was lost in the handsets division, while equally worryingly; the relatively well-performing home and networks mobility operation started to experience the effects of the downturn.

The radical and seen to be painful steps being taken to fix the mobile devices division have generally been welcomed by analysts. It will likely mean a reduction in manpower of some 2,000 to 3,000 in the areas and technologies impacted.

For example, Richard Windsor, global communications equipment analyst at Nomura Securities said in a note: "This is the kind of decisiveness that has been lacking for the last two years when things started to go wrong. While this substantially delays the illusive break-even, it does make it more likely to happen and so we see this as a long-term positive."

The retrenchment to focus on North America, Latin America and parts of Asia means that 1H 09 is likely to be very challenging resulting in another year of big losses in Mobile Devices.

The software platform and hardware rationalization plans flagged had been expected, and is probably the right way to move, but nevertheless means yet another switch around that will delay the recovery, probably by a significant period.

On the chips front, the strategy confirms that Freescale Semiconductor will no longer be a major supplier to Motorola, once its parent, and does not bode well for that company's efforts to sell its wireless chips group.

It means Motorola will rely on baseband devices from Freescale and Texas Instruments for 2G handsets, and potentially completely on Qualcomm for 3G, both on CDMA and UMTS models. This is quite a turnaround, but is not surprising in view of the surprise move earlier this year by senior Qualcomm official Sanjay Jha to become Motorola's co-CEO.

Little has been heard about the collaboration announced last year between TI and Motorola for UMTS phones, and there are suggestions that this is no longer continuing.

On the software side, the company will focus on Windows Mobile for the enterprise sector, Android for consumer handsets and retain the legacy P2K for low-end models.

Substituting Symbian with Android has some excellent advantages, said Windsor, but is also fraught with peril. The Android platform is much more immature than Symbian and the path that has been laid out for it is not without flaws.

Android has been designed to match the hardware requirement of Windows Mobile, so this means that one hardware design can be used for two phones with almost no modification (one using Windows and the other using Android). At the same time, on the plus side is that there will be no software license fee to pay.

The downside is that Android is not a yet a platform, it's a point product. This means that an awful lot of work needs to be done before it can be dropped into different form factors and user experience scenarios. Android has a high hardware requirement that means it can really address only the upper end of the market.

This, along with the limitations of P2K, means that Motorola will not be addressing the high volume, high value feature phone segments until at least 2010.

There is also the problem, as Windsor pointed out, that the ecosystem is at high risk of fragmentation. Google makes no guarantee of backward compatibility and putting the software into the open source community means that software development will be uncontrolled.

The net result means that there will likely be a high-end Android device or two late in 2009 but not much else.

It also means that the mass smart phone market will remain effectively unaddressed for all of next year and probably most of 2010.

Should the Android platform fragment, Motorola will have to maintain the entire stack itself to preserve compatibility potentially incurring added development costs.

So, quite for those heading the mobiles unit to be getting on with, while hoping that the other divisions continue to hold up well, will in particular be increasing crucial home and networks mobility unit.

- John Walko
EE Times Europe

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