Moto all about Android smartphones

Motorola (NYSE: MOT) has been winnowing its mobile handset operating systems of choice for the past few quarters, but in announcing its second-quarter earnings today, the handset maker is putting all its weight behind bringing Google’s (NASDAQ:GOOG) Android platform to smartphones beginning this year.

Sanjay Jha, Motorola’s co-CEO and CEO of Mobile Devices, confirmed that Moto will have two Android devices in stores in time for the holiday season. The devices will launch with two major US-based carriers and multiple carriers outside of North America, he said. Moto is also planning several additional Android devices for the first quarter of 2010, the majority of which will be smartphones, including Android-based iDEN phones. With this new focus, Jha said, Moto anticipates improvements to its overall average selling price (ASP) and gross margin percentage, which today are below the industry standard. On a quarterly basis, Jha said he’d be disappointed if Moto doesn’t break even in 2010.

“We are not focused on market share and volume; we are focused on making sure we are relevant and have good operating profit, gross margin and higher ASP,” he said. There has been an ASP decline amongst all smartphones in the industry, but Jha said he is confident that with Moto’s approach to supply chain initiatives, platforming, Moto’s approach to developing smartphones and the rationalization of R&D, Moto can deliver attractively priced phones into the market.

While Moto’s traditional strong suite has been the low-end and features phones, Jha said that it is leaving this business to its original design manufacturer (ODM) partners. Below a certain price point, the handset maker will work with its ODM partners to fill out its portfolio of voice-centric and low-end feature phones and isn’t investing internal resources to the low-end. Instead internal development will focus on Android, taking it from the high-end to the low-end of phones.

“Our core strategy is take Android to as low down the feature phone their as we possibly can by bringing in smartphone features, best of Internet, best of messaging, best of multimedia, best of location services,” Jha said.

Moto is also primarily focusing on the smartphone-centric US right now, which Jha said was responsible for the lower share Moto captured in Europe, noting, however, that Europe is the second strongest market for smartphones and will be a focus of the handset maker’s efforts going forward. Ultimately, Jha said, Moto is not interested in focusing on only one region and only high-tier products as it appears to be doing today, but the company is doing what it has to do to recover as soon as possible.

As part of this strategy, Moto’s workforce is more than 30% smaller than when Jha took over the reins last year and the cost structure has seen improvement under his leadership. The company is continuing on the path to separation of its device and infrastructure units, according to Jha, but it is still limited by the three factors that have been working against it since it was announced : the performance of mobile devices, the macro-economic environment and the stability in the mobile handset marketplace. “Those three things will ultimately govern our decision as to when we separate the business,” Jha said.