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Moto Looks to Diversify, Build on Android Success

Sarah Thomas
10/28/2010

Motorola Inc. (NYSE: MOT)'s mobile devices business grew its operating profit for the first time in more than three years, and earlier than expected, thanks to its Droid smartphones. (See Moto Posts Q3.)

For the third quarter, Moto reported $3 million in operating profit compared to a loss of $183 million a year earlier. Total profit rose to $109 million, up from $12 million a year earlier. Helped by an $871 million sale of its network equipment unit, Moto also saw its revenue rise 6 percent year-on-year to $5.8 billion. (See Motorola Posts $162M Q2 Profit.)

Motorola shipped 9.1 million phones in the third quarter, including 3.8 million smartphones. Since the second quarter, the company has added 12 devices to its smartphone portfolio, bringing its total to 22 launched this year.

Now Moto is turning its attention to other areas that need improvement -- the mid-range of smartphones, international markets, and home networking.

Squeezing in the middle
Moto has some mid-tier phones, including the Citrus for Verizon and three new AT&T Inc. (NYSE: T) feature phones. But Motorola's head of mobility and co-CEO Sanjay Jha said it wants to step up its game here, as well as in the enterprise -- not building enterprise phones per say, but ones that CIOs wouldn't bar from business.

Moto also wants to sell more tablets to consumers and keep the average selling price of its mobility products up, although Jha noted that he's not sure if Gingerbread, Android's upcoming OS release, is the right platform for them.

It is competitive pressure that is forcing Moto to diversify in the middle, Jha admits. He spent a lot of time in the analyst Q&A dispelling concerns over its dependence on Verizon Wireless and what might happen when its key partner gets the iPhone next year.

Jha says he sees High Tech Computer Corp. (HTC) (Taiwan: 2498) and Samsung Corp. as its biggest competitors in Android. To differentiate, Moto will focus on refining certain key experiences on top of Android, by building better enterprise-level functions; concentrating on MotoBlur as a service; and making sure it provides end-to-end services with customization, optimization, and support.

However, Moto may have to move away from its main form of customization, MotoBlur, if it wants to save face with Android. Jha said that the company would continue to invest in MotoBlur, a statement he's wavered on in the past, but admitted that when it’s an Android product, Google (Nasdaq: GOOG) calls the shots on the software stack. (See OS Watch: Operators Want Their Own OS.)

Moving abroad
Outside of North America, Moto saw its sales grow 30 percent. It launched three smartphones in China under its MING brand, bringing its total Chinese portfolio to 13, all released within the year. Latin America, where Moto currently has 10 smartphones, is another market it will continue to focus on. Moto will also make a substantial investment to reenter into Europe, Jha said.

Connecting mobility and the home
Motorola has had its mobile devices and home business combined for the past eight months, and Dan Moloney, head of Motorola Mobility’s Home business, said that the synergies are paying off. The company is focusing on linking together MotoBlur and its IP video business to bring content to any device with the same look and feel.

"In 2011, you'll start seeing converged experiences from us and then, as we move forward, more opportunity to differentiate our products in both the home and mobile in this converged world," Moloney said.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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