Cellphone sales at Motorola slid a stunning 39% in the first quarter, pushing the company's global market share to a historic low of 9.5% and widening its net loss.
Motorola, which plans next year to spin off its cellphone division, has lost half of its market share since the end of 2006 when its popular Razr phone led the company to a 22.4% global market share. Much of that loss occurred in the US, where Moto is the leading player but the company has lost business because it failed to roll out new models with advanced features at competitive prices. As a result, when people with Moto phones wanted to upgrade their phones, they often switched to different brands.
"Motorola's been a puddle drying up in the sun," said analyst Neil Mawston of the research firm Strategy Analytics. Still, Motorola Chief Executive Greg Brown hinted on a conference call with analysts that the division had hit bottom, saying its performance in the second quarter would be "flat to slightly up" in a growing market.
Brown also said the company is proceeding with spinoff plans for the division, a decision pushed by activist shareholder Carl Icahn. Brown admitted it will be costly to separate cellphones from the rest of the company. Icahn has argued that carving out the mobile-devices division will make it easier for the business to find new management to help with a turnaround. The division has been reeling from management turnover, thousands of layoffs and product missteps. It posted a $418 million operating loss for the quarter, compared with an operating loss of $233 million a year ago.
Motorola shares were down 30 cents, or 3.1%, to $9.25 in 4 p.m. New York Stock Exchange composite trading Thursday.
Brown said the company would speed the development of its "embryonic portfolio" of phones with enhanced messaging and touch features by winnowing its multiple software platforms and by enlisting the help of outside manufacturers. He said the company would jettison one platform for low-tier phones from TTPCom Ltd. in the United Kingdom, which it acquired for $192 million in 2006. The company will use three platforms for its mid- and high-tier phones.
As Motorola's base shrinks, Samsung, LG, and market leader Nokia are pouring out models with advanced features such as Internet browsing, navigation, music and better cameras. Samsung passed Motorola for the No. 2 spot last spring, and Strategy Analytics predicts that LG will overtake Motorola for the No. 3 spot in the next quarter. (info from The Wall Street Journal)