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Motorola tries its luck on smart phones

Posted: 09 Nov 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Motorola strategy? smart phone? handset market?

Recovery plan
Motorola has a long way to go before it can claw back what it has lost over the last two years, however. The company's share of the mobile handset market has crumpled over the last three years and is at their lowest levels in years.

In the first three quarters of 2009, for instance, the company's market share fell to an average of 5.4 percent from as high as 22 percent in 2006 when it shipped 217 million units. It's been downhill since as buyers embraced devices like the iPhone and abandoned Motorola handsets in droves.

In 2007, the company shipped 159 million handsets, down 27 percent from 2006, and representing 14 percent of the 1.14 billion units shipped worldwide by all manufacturers. By 2008, Motorola's share of the mobile handset market had fallen even further to 8 percent, or 100.1 million units, down 37 percent from the previous year.

The trend is still downward. EE Times estimates Motorola's total handset shipment in 2009 will be approximately 56.1 million units, down 44 percent from the previous year and representing a market share of approximately 5 percent.

The company is likely to see a resurgence in demand for its products in 2010, however, as more carriers sign on for its smart phones. Unit shipment may not begin to rise strongly, though, until demand for the Droid picks up since Motorola is focusing on selling less commodity-style devices.

Recent cost-cutting actions will likely put Motorola in a better competitive position over the next year. The company has drastically slashed expenses throughout its operations, eliminating more than 9,700 jobs in just the last year, according to Ed Fitzpatrick, chief financial officer.

Most of the cost reductions have taken place in the mobile devices division as Jha accelerated previously started reorganization programs that involved the elimination of product lines and the introduction of supply chain optimization actions, including design streamlining and tight inventory controls.

"We now anticipate an overall operating expense reduction of $1.9 billion with mobile devices realizing reduction in excess of $1.4 billion in 2009," Fitzpatrick said during the third quarter conference call.

"In supply chain, we continue to drive simplicity, platforming and operational process improvement that will result in lower component pricing, improved inventory turnover and higher gross margin," Jha said.

"While we will definitely focus on further cost reductions, most likely we will look to reassign those savings in such a way that we drive our product portfolio in higher product revenue. Our smart phone traction is the quickest driver of our financial performance," he said.

The problem for Jha and Motorola is that all other major mobile phone manufacturers have a somewhat similar strategy and they are already way ahead of their North American rival.

- Bolaji Ojo
EE Times

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