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Will the Droid X put Motorola back on the handset map?

Posted: 28 Jul 2010  Print Version  Bookmark and Share

Keywords:mobile  handset  cellular 

Motorola's Droid X

Motorola's Droid X

A handset player is making waves in the market. And it's not Apple, Google, HTC, Nokia, RIM or Samsung.

Believe it or not, it's Motorola Inc. After years' of red ink and lost share, Motorola's handset unit is making a comeback, according to an analyst.

It's Android-based handset line, dubbed Droid X, is apparently a hit. "Following week two (of its official rollout), Motorola's Droid X appears to be off to a good start, fueling confidence in Motorola's handset turn-around,'' said analyst Mark McKechnie of Gleacher & Co.

''Our checks reveal strong demand for the Droid X platform, with no supply available at retail as all production is still going to fill 'pre-order' backlog,'' he said. ''Our checks suggest virtually no Droid X phones available in Verizon retail outlets through Sunday, July 25, with limited 're-stock' shipments since the original channel fill.''

In other words, the Droid X is sold out to a large degree. ''Most do not expect supply to replenish retail outlets until early August,'' he said.

Motorola is expected to report its results on Thursday. ''We expect Motorola to update its (calendar) '10 target from 12-14 million Android units to the high-end, reiterate its goal for break-even for the division in Q4, and indicate 'more products to come'by year-end,'' he said.

''Sanjay Jha is making the right strategic moves in handsets, focusing on Android and platforms for the North American, Latin American and Chinese markets,'' he added. Jha is the CEO of the company's handset unit.

The Droid X is not the only product in the lineup. ''In addition, Motorola will keep the iDen business, which we estimate at about $350 million-plus in annual revenue at higher than division average operating margins,'' he added.

Still, the company has challenges. Handset competition remains stiff. Apple and RIM are grabbing share. Motorola, once the cellular-phone king, is now a smaller fish in a big sea.

Thanks to the smartphone, Research In Motion Ltd. (RIM) and Apple Inc. in the first quarter rose to the fifth and sixth positions in the global cell-phone market, according to iSuppli Corp. At the same time, Motorola fell to eighth place, according to iSuppli.

As recently as the first quarter of 2007, Motorola was the world's second largest cell phone shipper after Nokia. In contrast, Motorola in the first quarter posted a 29.2 percent decline in shipments to 8.5 million units, down from 12 million in the fourth quarter of 2009. This caused the company's rank to slide two positions to eighth place, falling behind both Apple and Chinese handset OEM ZTE Co. Ltd.

Now, Motorola is coming back amid a major reorganization. Earlier this year, Motorola announced the company is targeting the first quarter of 2011 for its planned separation. Motorola intends to separate into two independent, publicly-traded companies. One will include the company's mobile devices and home businesses, and the other will include its enterprise mobility solutions and networks businesses.

Jha, co-chief executive of Motorola, will serve as chief executive of Motorola's mobile devices and home businesses. In mid-July, Nokia Siemens Networks and Motorola announced that the companies have entered into an agreement under which Nokia Siemens Networks will acquire the majority of Motorola's wireless network infrastructure assets for $1.2 billion in cash.

In April, Motorola reported sales of $5.0 billion in the first quarter of 2010. The GAAP earnings in the first quarter of 2010 were $69 million, or .03 per share, which compares to a GAAP loss from continuing operations of $291 million, or .13 per share, in the first quarter of 2009.

Mobile devices segment sales were $1.6 billion, down 9 percent compared with the year-ago quarter. The GAAP operating loss was $192 million, a significant improvement compared to the operating loss of $545 million in the year-ago quarter.

- Mark LaPedus
EE Times





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