Kicking Moto While It's Down

The knives were out during Ericsson AB (Nasdaq: ERIC)'s fourth-quarter call with analysts and the media today, when CEO Carl-Henric Svanberg casually mentioned that Motorola Inc. (NYSE: MOT) was "on its way out" of the mobile infrastructure business. (See Ericsson Soars on Strong Q4, Outlook and Ericsson: Mobile Sector Is Resilient.)

With razor-sharp rhetoric, Svanberg cut some of his competitors down to size:

    Look at today's world: Nortel Networks Ltd. has disappeared, Motorola is on its way out, Siemens didn’t make it, Lucent didn’t make it. Ericsson is the one that stayed strong.

Or, put another way: "Mine's bigger than yours!"

His comment about Motorola takes competitor bashing to a whole new level. But are his comments justified, or is the grinning Swede consigning Moto's mobile infrastructure business to an early grave?

To put the remark in context, Svanberg was defending Ericsson's decision to cut 5,000 jobs when the company's fourth-quarter results were so good. He was summing up how the mobile vendor landscape has changed with the rise of strong Chinese players -- Huawei Technologies Co. Ltd. -- and consolidation, and explaining how now more than ever Ericsson needed to strengthen its leadership position. (See Huawei Predicts 29% Growth in 2009 and Huawei, ZTE Predict 2009 Growth.)

Heavy Reading senior analyst Patrick Donegan doesn't think Svanberg's comment was too wide of the mark.

“Nortel hasn’t exactly disappeared, but other than that it’s hard to find fault with the statement," he says. "The cellular infrastructure market has been on a path to consolidation to three or four big vendors for some time now.” (See Nortel Files for Bankruptcy Protection.)

Motorola would probably argue that such reports of its mobile infrastructure death are premature, if it commented at all: A company spokeswoman said Motorola doesn't comment on such issues.

While the vendor struggles to reverse the fortunes of its ailing mobile handset business, Motorola's mobile infrastructure business is certainly alive. (See Moto Will Lay Off 4,000 More, Moto Speeds Up Layoffs, Moto Freezes Benefits, Salaries, Motorola Delays Devices Unit Spinoff, and Handsets Hinder as Moto Posts Small Profit .)

Motorola's legacy infrastructure business comprises GSM, CDMA, and iDEN, and the company has put its weight into developing so-called 4G mobile broadband technologies WiMax and Long-Term Evolution (LTE).

Motorola doesn't break out mobile infrastructure revenues in its financial reports, so it's difficult to say exactly how the business is doing. Revenues from wireless infrastructure for mobile operators are grouped with the company's sales in IPTV systems, set-top boxes, and home gateways, all of which are housed in the Home and Networks Mobility unit.

In its preliminary fourth quarter results statement, Motorola said the Home and Networks Mobility business continued to perform "very well in a challenging environment."

Previously, Motorola noted in its 10-Q report to the Securities and Exchange Commission (SEC) for the third quarter of 2008 that the 1 percent drop in Home and Networks Mobility revenues to $2.4 billion, compared with the previous year, "reflects lower net sales of wireless networks, partially offset by higher net sales of digital entertainment devices..."

In that same quarter, Ericsson's Networks division reported revenues of 33 billion Swedish Kronor ($3.9 billion), Nokia Networks generated €3.5 billion ($4.5 billion) in total revenues (it doesn't break down its sales), and Alcatel-Lucent (NYSE: ALU) reported wireless infrastructure sales of €1 billion ($1.3 billion).

In 4G, Motorola has made a good start in mobile WiMax and is contesting the top spot. And for LTE, the vendor is basing its eNodeB product on the same hardware platform as its mobile WiMax base station, according to the new Heavy Reading report, "LTE Base Stations & the Evolved Radio Access Network," which analyzes equipment vendors' LTE product portfolios. (See Operators Face LTE Deployment Dilemma.)

Motorola's existing mobile infrastructure business, then, appears to be in decline, though it's still pushing ahead with efforts to be one of the players in the emerging 4G networks sector.

But on its way out? It's certainly loitering dangerously close to the mobile infrastructure exit door, where, it would seem, Svanberg is ready to slam it shut and leave Motorola out in the cold.

— Michelle Donegan, European Editor, Unstrung

lrmobile_jepovic 12/5/2012 | 4:13:34 PM
re: Kicking Moto While It's Down It doesn't occur to you that Ericsson might know something we don't? Perhaps Moto has stayed out of tenders recently, or perhaps a common customer gossiped.
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