Google's Q1: Motorola Mobility questions abound

Motorola Mobility's market share is declining. What is Google going to do about it?

Google reports its first quarter results Thursday and questions about the search giant's plans for Motorola Mobility will surface.

The company is expected to report first quarter earnings of $9.65 a share on revenue of $8.15 billion excluding traffic acquisition costs. The focus will be primarily on Google's paid click rates, but analysts will be antsy about Motorola too. Unfortunately, Google executives aren't likely to say much given Chinese regulators are holding the deal up.

While the Motorola Mobility deal is mired in limbo, market share for the device maker continues to decline. The big question: Should Google ditch Motorola's operations?

Piper Jaffray analyst Gene Munster outlined the Motorola Mobility issues. What will Google's roadmap for Motorola Mobility look like?

He said:

Given that investor focus has been on the impact of Motorola on margins, we believe that if Google were to outline an operational/financial roadmap for the acquisition, it would likely have a positive impact on Google shares. However, we believe once investors move past the impact to margins, the true concern may be fundamentals at Motorola. We note that Apple and Samsung have emerged as the clear leaders as smartphone providers. The pair provided 46 percent of all smartphone sales in Q411, up from 38% in Q3. Motorola's smartphone market share decreased from 4% to 3% in the same period. If Google is serious about keeping Motorola as a part of its business, we believe the company must address the issue that Motorola does not seem to make devices that consumers want.

The solution here is relatively simple. Google will have to get better hardware designs from Motorola and hand it the latest Android releases. The catch is that Google partners will be annoyed.

Good luck with sorting that one out Google.

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