In my earlier post on Motorola, I had mentioned their need for a better product mix and a better position in the SmartPhone / Convergence Device segment. There were not many changes in Motorola’s product mix in the second quarter with just upgradings to the RAZR model. This over-dependence on its RAZR model has proved detrimental to the company and it has slipped to the third position in the mobile phone market behind Nokia and Samsung.
Motorola, Inc. (NYSE: MOT) has three business segments: Mobile Devices, Home and Networks Mobility, and Enterprise Mobility Solutions. For the second quarter of 2007, the company reported net sales of $8.7 billion, a 19% decline from $10.8 billion in the year ago period. Net sales were down 40% in the Mobile Devices segment, up 9% in the Home and Networks Mobility segment, and up 42% in the Enterprise Mobility Solutions segment primarily due to the acquisition of Symbol for $3.5 billion in January this year (smart acquisition).
In the second quarter of 2007, Motorola shipped 35.5 million mobile handsets, a 21.8% decline from 45.4 million in the first quarter of 2007 and a 31.5% decline from the year-ago period. As per IDC, Motorola now has just 13% of the market. It was the only vendor among the top five to post a year-on-year decrease. Apart from a lackluster product mix, the company also lost out due to shipment challenges in Asia, the Middle East, Africa, and to lesser extent, Europe.
The company does not expect its Mobile Devices segment to be profitable for the full year 2007. It is undertaking aggressive steps by enhancing its product portfolio to include products based on improved software platforms and technologies that go beyond 3G, reducing workforce, going for multiple silicon providers, and rationalizing the business’s product pricing structure and distribution strategy.
Motorola’s performance and its outlook for the year have affected its stock, which is on a downward trend. It is currently trading around $16.9.
Motorola has a great brand and lots of experience to be a key player in the convergence device market which the iPhone has breathed new energy into. It will, most likely, have a CEO change with Ed Zander being replaced by someone more effective. At the moment, the company seems to be waiting for new leadership, and investor should too.
This segment is a part in the series : iPhone Competitors