Posts tagged Motorola

Motorola co-Chief Executive Officer Sanjay Jha. Photographer: Tim Boyle/Bloomberg

Jan. 4 (Bloomberg) — Sanjay Jha, chief executive officer of Motorola Mobility Inc., talks about the company’s business strategy and outlook following its spinoff today from Motorola Inc. Jha, speaking with Betty Liu on Bloomberg Television’s “In the Loop,” also discusses the possibility Verizon Wireless may offer Apple Inc.’s iPhone to customers and its potential impact on Motorola. (Source: Bloomberg)

Motorola Mobility Inc., the mobile- phone maker spun off from Motorola Inc. today, won’t just need to challenge Apple Inc. and Research In Motion Ltd. to succeed. It also needs to defy history.

No mobile-phone maker has returned to the top after losing its foothold, underscoring how competitive the industry is and how quickly customer tastes change. Motorola’s handset business, No. 2 globally as recently as 2007, has fallen to seventh, according to researcher Gartner Inc., and is now separating from the rest of the company in a bid to recover.

“This is a business where comebacks are very hard to achieve,” said Tero Kuittinen, an analyst with MKM Partners LP in Stamford, Connecticut, who has covered the industry for 13 years. “Rapid product evolution tends to leave old champs permanently behind the new vanguard.”

Motorola Mobility Chief Executive Officer Sanjay Jha is banking on continued demand for phones built on Google Inc.’s Android software to win users from Apple’s iPhone and RIM’s BlackBerry. He also needs to persuade consumers to choose Motorola’s handsets over Android phones made by HTC Corp. and Samsung Electronics Co.

Motorola Mobility, based in the Chicago suburb of Libertyville, rose $2.43, or 8 percent, to $32.67 at 10:18 a.m. in its first trading day on the New York Stock Exchange, valuing the company at $9.6 billion. The stock trades under the ticker MMI. Motorola Solutions Inc., formed from Motorola’s remaining two-way radio and scanning-gear units, began trading as MSI.

Profitability

The industry’s former top competitors that succumbed to faster-moving rivals include Ericsson AB, Palm Inc., Siemens AG and Alcatel SA. Ericsson, which competed with Motorola and Nokia Oyj in the top 3 throughout the 1990s, combined its phone unit with that of Sony Corp. in 2001 to help regain lost market share. The venture now ranks sixth, according to Gartner.

Siemens and Alcatel, both in the top five a decade ago, never recovered from market-share losses and ended up selling or giving their mobile-phone businesses to Asian rivals.

Motorola may not need to return to the top five to be “solidly profitable” this year, as long as it manages its smartphone business well, Kuittinen said. Sony Ericsson was able to return to profitability with relatively low unit sales in just a few markets, and Motorola can do the same, he said.

To complement its North American business, Motorola has a foothold in Latin America, where smartphone sales are growing faster than in the U.S., he said. To exceed investors’ expectations this year, Motorola also needs to make progress in Asia, he said. Kuittinen rated Motorola “buy” and doesn’t yet have a rating for Motorola Mobility.

Verizon’s IPhone Challenge

Jha, 47, joined Motorola from chipmaker Qualcomm Inc. in 2008, charged with reversing a two-year sales slump. He has narrowed the phone unit’s losses by cutting the variety of basic talk-and-text phones in Motorola’s portfolio and focusing on a smaller range of smartphones based on Android.

Still, he is playing down the prospects of a sudden improvement in performance. The mobile-phone unit probably won’t make any money in the first quarter as the competition for the attention of Verizon Wireless, the largest U.S. mobile carrier, increases, he said last month. The unit had a third-quarter profit, excluding some costs, after three years of losses.

Verizon Wireless will probably start offering the iPhone to its customers this year, people familiar with the company’s plans said last year. Verizon is the main carrier for Motorola’s Droid phone.

‘Headwinds’

“There’s some new competitive dynamic developing at Verizon,” Jha said in an interview on Bloomberg TV today, adding that he is working under the assumption that the carrier will offer the iPhone. “We will deliver world-class products at Verizon, at other carriers in the United States, we will introduce tablets and we’ll grow in China and Latin America.”

Motorola devices accounted for about 37 percent of Verizon’s smartphone shipments in the fourth quarter, estimates Jeff Fidacaro, an analyst at Susquehanna Financial Group in New York. That will drop to about 20 percent in the first quarter, primarily due to the iPhone’s expected arrival, said the analyst, who has a “positive” rating on Motorola Mobility.

“There’s clearly some headwinds from the iPhone coming and from lower-priced Android phones out of China,” Fidacaro said. “The question is how quickly can they recover and can they grow their portfolio” at carriers other than Verizon.

Motorola Mobility will probably generate revenue of $12.6 billion in 2011, according to a Bloomberg survey of 8 analysts. Apple will have sales of about $89.4 billion in its fiscal year that just begun and RIM’s sales will be $23.6 billion next year, according to the average of estimates compiled by Bloomberg.

Android Tablet

Motorola investors received one share of Motorola Mobility for every eight shares they owned. The company also swapped seven Motorola shares for one new share in Motorola Solutions, boosting the stock’s value by a proportional amount to lift its marketability. Motorola Solutions added 11 cents to $37.42 at 10:21 a.m. on the New York Stock Exchange.

After today’s stock market debut, investors’ focus will shift to the Consumer Electronics Show in Las Vegas, where Motorola Mobility may debut a tablet device this week. Jha has said that he’s planning to sell a tablet in early 2011, making Motorola the latest to enter a market dominated by Apple’s iPad.

Jha has said he plans tablet devices with 7-inch and 10- inch screens. In the increasingly crowded tablet market, the larger device would compete with the iPad and a smaller device would compete with RIM’s planned PlayBook tablet and Samsung’s Galaxy Tab, which also uses Android.

Motorola may be better placed than its Android rivals in the tablet market, even if Samsung has a head start, Fidacaro said. In letting Google Vice President Andy Rubin demonstrate its new tablet software on a Motorola prototype last month, the company “snagged the pole position,” he said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net