Motorola co-CEO Sanjay Jha has been hearing a lot of about the "d" word---differentiation---since HTC's Incredible launched. At an investment conference, Jha was peppered with questions about how much marketing love Motorola would get from Verizon Wireless going forward.
In many respects, the questions Jha fielded were an extension from Motorola's most recent earnings conference call. Ever since the HTC Incredible launched on Verizon, analysts and investors have been wondering about Motorola's next act. What can it do to differentiate itself in the Droid franchise?
There's a good big of hubbub about two new Motorola devices coming to Verizon soon. Jha didn't dispute an analyst assertion about those devices, but didn't confirm them either, according to a transcript of his talk. An analyst said Verizon let it slip that Motorola Droid devices are coming soon. Jha said "I wasn't there. I don't know what Verizon said, but I certainly will participate in the Droid franchise."
The bigger picture here is that Motorola has a lot of Verizon Wireless marketing support at stake. If Verizon Wireless loves your device it can single-handedly carry a device maker. There are multiple examples of this effect. Motorola is a fine example. Its Droid handset---along with Verizon Wireless marketing---made Motorola relevant again. The other end of the equation: When the Palm's Pre bombed at Verizon Wireless the company fell into a death spiral before HP bought it.
Meanwhile, Motorola's mobile device unit, run by Jha, will become in independent company. Jha has to show Motorola's mobile unit has a sustainable product pipeline with the profits to match.
- HTC grabbing market share at expense of Motorola, RIM
- First look review: HTC DROID Incredible from Verizon Wireless
Jha's first message at a Barclays Capital conference was that Motorola wasn't panicking. The company is familiar with the latest from HTC and has fielded these questions before.
I think we are very well-positioned. I think we will participate in the Droid franchise well. We will introduce new Droid products in the Verizon franchise. I think this is probably the HTC Redux for me because when Nexus One came out, everyone thought Motorola was dead, and we survived. I think it's possible that we will survive again. I actually think the quality of devices that we are producing, I'm excited about. I think that they are competitive and some of them are actually probably better than competitors.
Jha was also asked about whether Android was a help or a hindrance. Sure, Android is a hot mobile operating system, but handset makers are increasingly using it. Jha said its Motoblur service, which now has 1 million subscribers, was a differentiator. Jha also said Motorola would be aggressive in moving to the latest Android releases.
You've got to be precise. So 2.0 which is what Droid was, 2.0 to 2.1 I didn't think there was a big change. 2.1 to 2.2, which was announced at Google I/O, I think there are some pretty important things there. But you'll see us being very aggressive in introducing 2.2 product. After that, as I understand it, I think Google will decide. But I think there's a 3.0 or a 2.5. I think that will be a fairly big rev. So 2.0 to 2.1 wasn't a big thing. 2.2 I think you will see we will introduce flash, which I think is very important for Internet. Some don't, I understand...I think if you could play flash 10.1, you could render 98% of the content of the web. That's why it's important I think.
However, HTC also plans to ramp the latest Android quickly too. Motorola also said the device hardware is what wins over consumers.
I would say that OS alone is not what consumers choose a phone on. In the United States, between 30% and 40% of the decision is in the feel and look of the device. In Korea, in China, in Asia, in Latin America, that number is close to about 60% of the decision is made on the feel and look of the device. So OS is important; OS has become meaningfully more important. Of course, Android is getting more traction as an OS. Having participated in that ecosystem, I think being one of the better practitioners of that ecosystem puts us in a good place.
That said Motoblur is the company's hedge against Android. Motorola has to diversify from the Droid franchise or it's completely dependent on Verizon's marketing. Of course, Motorola is expected to have the Droid II in the pipeline for July---something that Jha sort of confirmed. But the big question came down to differentiation again. If Motorola's mobile device unit is going to make money it has to be differentiated against rivals like HTC. What will Motorola bring to the party?
I think making money and breakeven, good execution can get you there, but in the long term I think differentiation is going to be important. I am very focused on that. I think, if you look at the way we are trying to restructure this company and heading towards a much more software-centric company, much more services-centric company, the investment we are making in MOTOBLUR now, application stuff, I think, in 2011, we will be differentiated.
But this is an extremely competitive marketplace. As you know, I, in my previous life, have worked with nearly all of my competition in one form or another. I have good understanding of their capability, what they do well, what they don't do well. I feel comfortable that we can differentiate ourselves in this marketplace, I really do...Anyone can make any company breakeven on a given day. The question is how to do that in such a way that that lays the foundation for growth for us in the future.