Motorola’s position in the handset market has fallen sharply from the heights of the all-conquering RAZR two years ago to its current status of an also-ran.
Senior industry figures who have seen Motorola’s product roadmap for the year aren’t hopeful of a recovery until 2009. However, the good news is that the operators and retailers are willing Motorola to turn it around.
Moto sales fell 36% in Q4
The lowest point came in Motorola’s 2007 financial results, with a fall in sales and market share at a time when other handset manufacturers were coming out with healthy balance sheets.
At the height of its RAZR years, Motorola’s UK market share was around 25% - fuelled in no small part by Carphone Warehouse buying 500,000 pink RAZRs.
As things stand in the UK now, Nokia is believed to have a share of 30%, Sony Ericsson has 28%, Samsung has 23%, while Motorola trails way behind with 6% - on a par with the relatively new entrant LG. To make matters worse, most of Motorola’s handsets in the UK are relatively low-end prepay phones.
Motorola has also had a tough time globally. Sales for the mobile arm fell from £3.8bn in the final quarter of 2006 to £2.4bn in the last quarter of 2007.
Meanwhile, Nokia increased profits for the final quarter of 2007 by 46%, while Sony Ericsson increased profits by 22%.
The rapidly shrinking market share in Motorola’s mobile phone business has dragged the whole company down.Other parts of Motorola, such as the radio and set-top box businesses, made good profits, but the mobile phone business is still the biggest – financially and culturally.
Living off the RAZR
The RAZR V3 was undoubtedly the catalyst for Motorola’s surge three years ago, but it has arguably also been its weakness.
Motorola’s partners point to the manufacturer’s reliance on the RAZR design for bringing the company to the difficult position it now finds itself in.
A succession of unremarkable follow-ups failed to capture the imagination of the market: SLVR, RIZR, KRZR, RAZR V3x, RAZR Maxx and RIZR Z8.
Motorola’s difficult user interface also left many first-time Motorola users running back to Nokia and Samsung.
Meanwhile, Nokia, Sony Ericsson, Samsung and LG were developing new areas in design, music, photography and technology.
One senior analyst says: ‘The market is a lot more fragmented now and the days of one killer product are behind us. The iPhone is a good example of that. It’s a great product, but it doesn’t cater for the whole market.’
The lack of a streamlined software platform is another issue adding to Motorola’s difficulties. It uses more than 10 different software programs, including Symbian, Windows and Linux for its handsets, making it much more time consuming and expensive to personalise the handsets for its operator customers’ needs.
Meanwhile, its competitors have managed effective economies of scale with only three or four different software platforms.
‘They’ll be flying when they get the products right’
Motorola is unlikely to turn the business around this year. Ben Wood, analyst at CCS Insight, says: ‘They won’t get themselves into a stable place before the second quarter of next year,’ adding that it all depends on their handset roadmap.
Senior figures say that the product roadmap is poor, but they also say that by other metrics – albeit not as critical as products, Motorola is among the best performers.
‘Its account management is very strong, marketing is solid, testing is very good, and the supply chain is very good. In fact, there are few manufacturers better than Motorola in these important areas. For the long-term success it’s the bedrock Ð how well they’re structured to support operators and retailers,’ an operator handset buyer tells Mobile.
It might sound odd that Motorola is complimented for doing everything right except for making decent handsets, but the operator source says this shouldn’t be sniffed at. ‘As soon as they get the products right, they’ll be flying.’
He draws a comparison with LG. ‘The Prada was a phenomenal product, but if the testing and forecasts were better, they could have sold double what they did.’
Motorola is believed to be the best among manufacturers for bringing its phones into the market with exciting marketing and valuable support.
The company has significant strengths globally, including a strong brand and a highly rated marketing department. It is also respected in its huge home US market, as well as emerging markets including China and India.
This year’s product roadmap includes the 3G slider Z10, a capable but clunky update to the Z8. It also has the E8 ROKR Ð an indication of Motorola’s appetite to stay on the music market – and the clamshell MOTO U9.
A senior buyer in the industry agrees that Motorola’s handset range for this year is nothing to shout about, describing the recently launched products as ‘ropey’.
Coming out with a killer range seems to be the only way Motorola could save itself. ‘There is an element of starting from scratch. I think they will have to do something revolutionary,’ he says.
On the music front, it will be difficult for Motorola to compete with Sony Ericsson’s Walkmans and Nokia’s Nseries. In terms of music functions, the ROKR falls far behind the N81 and the W910i.
Motorola is also behind in camera phones. The Z10 only has a 3.2-megapixel camera, while Sony Ericsson’s K850, Nokia’s N95 and LG’s Viewty all come with five megapixels.
But the operators and retailers are on Motorola’s side and are keen to see the manufacturer recover. One of the main reasons is the concern over Nokia’s increasing market power. The Finnish mobile giant is in one of its strongest positions of recent times and its trade customers are getting concerned about just how dominant it can become.
‘Nokia is very successful with branding. Operators have a very complex relationship with Nokia because customer loyalty is distracted by the Nokia brand. From the operator perspective it’s good to have a diversity of suppliers. Operators don’t want dominant manufacturers,’ another operator source says.
Because Motorola’s retail partners want to see it succeed and balance out the disproportionate power that Nokia currently has, operators are willing to support the struggling handset manufacturer. If it does succeed in bringing out a compelling product, it is likely to gain market share very quickly.
Chinese acquisition unlikely
Rumours of a possible sale of Motorola’s handset division have been flying, with Chinese handset manufacturers Huawei and ZTE identified as possible buyers.
However, some doubt the sale could get through the supposed protectionist American business culture. ‘There is no way the US government will allow Huawei or ZTE to buy Motorola. They will say it’s a national security issue. They go mad about net neutrality in America. There is nobody of scale in the US making handsets,’ one analyst says.
Others believe that no-one would want to buy the company because of the situation it is in. ‘It’s difficult to see that anyone would want to buy it as it stands,’ Wood says.
Senior industry sources say there is no need to hit the panic button quite yet. ‘They nee