Motorola Mobility needs to aim for stability

Piggybacking on Google's Android for its smartphones and Xoom tablet contributed to Motorola Mobility's revival of fortunes but stability, rather than growth, should be company's main focus, urge industry watchers.
Written by Kevin Kwang, Contributor

Motorola Mobility is seeing an upswing in fortunes due to its close ties with Google's Android mobile operating system (OS), but the company still needs to aim for continued stability in its performance amid growing pressures from rival mobile makers chasing after the same pie, note analysts.

Bryan Ma, associate vice president of client devices at IDC Asia-Pacific's domain research and practice groups, said Motorola Mobility--the consumer device division spun off from Motorola on Jan. 4 this year--is showing "encouraging signs of revival" in recent times.

Elaborating, the analyst pointed out that Motorola Mobility's decision to ditch its own development plans and align its smartphones with Google's Android OS has "picked them back up". The smartphone maker reported in an earnings call last October that its mobile device business posted a profit for the first time since 2006, largely driven by Android-based device sales. In numbers, Motorola witnessed a US$3 million operating profit in the third quarter of 2010, compared to a loss of US$183 million in the same quarter last year.

Ma said in a phone interview with ZDNet Asia that the decision to go with the Android platform shows Motorola is learning from its mistakes, and have avoided becoming a "one-hit wonder" in the industry with its Razr handset which was sold in 2005.

"Because the mobile market evolves so quickly, they have learnt that it is not enough to produce a handset with mass appeal and then market it in several new colors to generate revenue," the analyst said.

Other analysts ZDNet Asia spoke to agreed.

Tony Cripps, principal analyst at Ovum, said Motorola Mobility's wholesale adoption of Android was a "pragmatic decision" after it had previously "wasted considerable time and money on its own, largely unsuccessful, smartphone platform strategy".

Gerald Tan, GfK Asia's regional account director for IT and office, noted that within Southeast Asia itself, the Android platform is enjoying "huge success" within the smartphone category. Compared with six months ago, Tan said the proportion of Android-powered smartphones grew 9 percent to a double-digit share of the region's overall mobile OS market.

"In fact, the major brands that adopted Android OS all saw significant growth in market share within the smartphone segment," he added.

Motorola challenged in Android realm
Therein lies the problem, though.

Cripps noted that while the move to power its handsets with Android has paid off for the company, Motorola Mobility faces "immense competition" from other Android OEMs (original equipment manufacturers) for customer attention.

Furthermore, consumers perceive considerable value from the vertical integration between devices, services and applications, he added, noting that Motorola may find it difficult to compete with other OEMs that have tighter integrations and the ability to publish more content for their customers.

HTC, for example, is an OEM that is investing heavily into Android as well, Ma pointed out. The company also offers its HTCSense.com service, which allows users to save their text and e-mail messages as well as offers security features such as remote wipes.

Despite these challenges, Ma said Motorola Mobility's seemingly close ties with Google will stand it in good stead. This can be seen through its Xoom consumer tablet, unveiled during the Consumer Electronics Show held in Las Vegas earlier this month, which is powered by Google's latest version of Android, Honeycomb, the IDC analyst said.

Cripps, too, regarded Motorola's relationship with Google as a decisive plus. "Motorola looks like being an early adopter of the latest Android builds, so it may have an advantage over cheaper options for those seeking the latest technology," said the Ovum analyst.

The Xoom tablet is expected to give Apple's iPad, which is currently dominating the tablet device segment, a good run for its money. Expected to hit the markets in the first quarter of 2011, the Motorola tablet has a designed-for-tablet OS in the form of Android Honeycomb, and also boasts hardware specifications such as dual-core processor, front- and back-facing cameras and a HDMI socket to boot.

Stability-first strategy needed
The analysts, though, called on Motorola Mobility to capitalize on its resurgence to stabilize its previously volatile business.

Cripps, for one, is expecting the company to be a "more consistent performer" from now on, but warned that the company should not be harboring thoughts of reclaiming its former position of second-ranked handset manufacturer in terms of shipments.

The analyst explained that there are now better-funded, more ambitious rivals such as Samsung and Apple in the ascendency, and major Chinese OEMs are also making good strides.

"Getting the fundamentals right is paramount for Motorola Mobility following its extended period of instability," he urged.

Similarly, Ma acknowledged that the company has "many balls to juggle" but it should be looking to sustain its current upswing and stabilize its business.

The IDC analyst said several factors will aid the company in its goals, pointing to Motorola Mobility's technical know-how, good brand name and, following its split from Motorola's networking business, some financial staying power.

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