Motorola Pins Its Hopes On The Android

According to a recent Gartner release, worldwide mobile phone sales declined 8.6% while smartphones grew 12.7% in the first quarter. Motorola (NYSE:MOT) continued to lose market share but managed to move up to the No.4 position, mainly because Sony Ericsson lost market share. Motorola hopes to revive its product line with Android phones in the fourth quarter. Will this move be enough to strengthen its position in the industry, especially since Samsung, LG, HTC, and Sony Ericsson are also launching Android phones? Let’s take a closer look.

Motorola has been struggling with losses and declining sales mainly because of the lack of a model as popular as its Razr handset. It hopes to change that with its new Android phone to be released at the end of the year. To differentiate its product from other Android phones, it is trying hard to get developers to build applications for the phone.

Despite losing market share, Motorola continues to enjoy strong ties with operators around the world, and developers benefit from its global distribution. The company plans to build phones for both the consumer and enterprise markets priced in the mid- to high-tier range. However, developers will not be able to access Motorola’s Android-specific software development kit until later this year. With the success of Palm’s webOS, the competition has gotten tougher, and the popularity of third-party applications could well be the deciding factor in the smartphone race.

On the financial front, Motorola reported a relatively strong first quarter on April 30. Q1 revenue was down 28% to $5.4 billion. Net loss was $231 million or $0.13 per share versus loss of $194 million last year and $3.6 billion last quarter. It ended the quarter with $6.1 billion in cash. Operating expenses were down $500 million over the year and Motorola has increased its 2009 cost savings target by $200 million to $1.7 billion. Q4 coverage is available here.

By segment, Home and Networks Mobility sales were down 16% to $2 billion with operating earnings at $115 million. Enterprise Mobility Solutions revenue was down 11% to $1.6 billion with operating earnings at $156 million.

Mobile Device sales were down 45% to $1.8 billion on shipment of 14.7 million handsets. Operating losses reduced sequentially to $509 million. Motorola launched seven new phones in the quarter. In 2008, it had 50 product launches and is working to bring the number down. Motorola has phones on several platforms and none of them seem to be working well. Hopefully, the Android will change this.

For the second quarter, Motorola expects a loss of $0.03 to $0.05 per share. It is currently trading around $6 with market cap of about $14 billion. It hit a 52-week high of $6.95 on June 30.