Motorola Inc. has largely laid out its mobile-phone strategy to the industry-it plans to take advantage of key growth markets like China, while diversifying its phones with software from the likes of Microsoft Corp. and Symbian-but industry watchers see the execution of the scheme as the real sticking point.
“They’re having some success,” said Alex Slawsby, an analyst in IDC’s Mobile Devices program. “Still, they have some ways to go.”
Indeed, it seems in many cases Motorola can talk the talk, but often stumbles when it comes to the walk. For example, the company delayed the introduction of several new camera phones and color-screen phones until after Christmas, largely missing the critical U.S. holiday shopping season.
Verizon Wireless confirmed the delay, which came to light late last week. The news, which could affect Motorola’s U.S. carrier relationships, sent the company’s stock down about 5 percent to $11.91 per share.
Motorola sought to dispel concerns over its holiday sales, reiterating its quarterly guidance and promising to show improvements in earnings and margins.
“While we are encountering some variation in our introduction of certain new models, we believe PCS is making strong progress overall in its ability to meet market needs by working closely with customers all over the world and successfully testing and launching new products in a timely fashion throughout the year,” said Mike Zafirovski, Motorola’s president and chief operating officer. “This improvement is based on the implementation of hardware and software platforms that increase the productivity of our talented research and development organization within our PCS business.”
Analysts cited such delays as Motorola’s main struggling point in the phone business and perhaps one of the reasons behind the departure of the company’s Chief Executive Officer Chris Galvin. Analysts said Galvin could often discern key strategic moves, but the company would frequently fail to fully grasp the opportunity.
“They need to be more nimble,” said IDC’s Slawsby, citing Motorola’s slim camera-phone line-up. The company sells only a few such devices, while Samsung Electronics Co. Ltd. boasts more than a dozen camera phones. “I think delays can have a particularly negative effect.”
“Some more housekeeping needs to be done,” said Chris Ambrosio, the director of Strategy Analytics’ Wireless Device Strategies.Once the king of the mobile-phone market it helped create, Motorola has since sagged against the onslaught of Finland’s Nokia Corp. Nokia managed to streamline its development and delivery system with huge volumes of popular phones, Slawsby said. Motorola, a sprawling technology conglomerate, wasn’t able to move fast enough to parry the charge. And now Asian upstart Samsung is nipping at its heels.
However, Motorola in recent years managed to provide investors the hope of a turnaround. The company launched its HelloMoto campaign along with several sleek phones, including the popular T720. The company also implemented its six sigma cost-control plan and worked to make its handset platform more efficient.
Further, Motorola set out to take advantage of growing markets and currently commands the top spot in China, the world’s biggest wireless opportunity. The company also made clear its software plans by dropping its stake in Symbian, teaming with Windows giant Microsoft Corp. and putting its weight behind a Linux/Java platform dubbed Motojuix (pronounced Moto juice). Analysts now believe Motorola plans to divide and conquer the world market by using Motojuix in Asia, Symbian in Europe and Microsoft’s Windows in the United States.
“It really is a story where Motorola has really engaged its efforts in jumpstarting its product line,” IDC’s Slawsby said.
However, it’s unclear whether Motorola will be able to follow through with its plan while at the same time remain one step ahead of the competition.
“They’ve got to focus their resources further,” said Strategy Analytics’ Ambrosio.
Focus, industry watchers agree, is what Motorola needs to stay competitive in the worldwide mobile-phone market. China represents a huge opportunity for the world’s wireless firms, and the country’s handset market is particularly fierce. Motorola to date has managed to hang on to the top spot, but its position is eroding rapidly.
Due to the emergence of several domestic handset players and the recent SARS outbreak, most of China’s mobile-phone inventory has been backed up by three or four months. Motorola likely will have to lower its prices to move its aging inventory, Ambrosio said, which will cut into the company’s Chinese revenues. Further, Motorola hasn’t expanded its presence into the country’s smaller cities, thus losing market share to more agile domestic players.
The situation is such that Strategy Analytics forecasts Chinese mobile-phone players will account for up to half of the country’s phone market this year, and that Motorola probably will lose its top spot to Nokia by early next year.
“Motorola is definitely in danger there,” Ambrosio said, pointing out the company recognized the importance of China early on, but failed to take command of the market.
Motorola also faces pitfalls in its software strategy. The company embraced a Linux/Java platform in response to the governments of Japan and South Korea, which are promoting Linux as an alternative to Windows. Japan and South Korea are also petitioning China to join in the Linux effort.
At the same time, Motorola is teaming with Microsoft to sell a device using the software giant’s Smartphone operating system. Ambrosio said the move might appeal to North American users who have grown up with Windows computers. Finally, Motorola recently dropped its stake in Symbian, while pledging to continue to use the platform. The company recently released its first Symbian device in Europe, an area in which Symbian enjoys strong support.
Motorola appears to be following Samsung’s lead on the operating system front, as Samsung also licenses a variety of software platforms. But industry analysts have questioned such a move since Motorola now must spread its resources among the various platforms rather than consolidating its strength behind one, as Nokia has done with Symbian.
But regional and technology issues aside, industry watchers agree that quickness and execution are Motorola’s real concerns.
Motorola “is trying to do all the things its competition-notably Samsung-is already doing well,” Slawsby said.
“They’ve got to help define those (technology and industry) standards rather than just following the market,” Ambrosio commented. “They need to have a forward-looking strategist.”
