Moto trims handsets, workforce to focus on Android

While low-end handsets shipped at high volumes has been Motorola’s traditional mobile-device strategy, the struggling handset vendor plans to reduce its portfolio and hone in on Google Android-based smartphones in hope of staying relevant – or just staying afloat. Motorola’s fourth-quarter earnings included a steep loss in revenue, the suspension of its quarterly dividend and more layoffs, leaving some to question if a revival is even possible.

“I don’t know if it’s arrogance or anything like that, but they believed wholeheartedly in their existing product set and have not innovated enough, which they now have to do with fewer staff and fewer financial resources,” said Juniper Research analyst Andrew Kitson. “It’s really going to be a tough year ahead of them.”

The handset division shipped 19.2 million devices in the fourth quarter, down from 25.4 million in the third quarter and 40.9 million in the fourth quarter of 2007. Sales were also down 51% year-over-year, totaling $2.35 billion. With an operating loss of $595 million, Moto estimates its market share at 6.5% closing out December. In an attempt to regain its market-leading position, Moto is building on its plans announced in the third quarter, when – catalyzed by the economy – it delayed its plans to spin off its phone unit, trimmed its 20 disparate platforms to a handful, realigned chipset partners and ditched Symbian UIQ as it cut the number of operating systems its handsets used to just three, Google’s Android, Windows Mobile and its own Linux P2K.

In this quarter, the company launched 15 new phones, including six GSM devices, one 3G handset, five CDMA devices and three iDEN handsets. While it continued to promote its Aura luxury phone, touch-screen Krave and latest Renew handset made out of recycled water bottles, most of the nearly 50 handsets introduced in 2008 were basic devices targeting the lower tier. Moto has yet to find a follow-up to its popular Razr handset, introduced in 2004 but surpassed last year by the iPhone as the US’s best-selling phone.

Sanjay Jha, co-CEO and CEO of Mobile Devices, said that between 30% and 40% of Moto’s research and development investment will go toward smartphones, focused primarily on differentiating the user interface and experience. Moto is targeting the fourth quarter for its smartphone debut, with a focus on easy-to-navigate Web browsers and data plans.

“Our roadmap has a much greater focus of bringing smartphone functionality to lower tiers with touch and Qwerty and experiences around messaging and mobile Internet,” Jha said on today’s conference call. “This allows us to address the largest and fastest growing gross-margin tool in mobile handsets. Our smartphone roadmap will include a variety of devices, many based on the Android operating system. Android is a flexible operating environment and has attracted thousands of developers with it as we believe we can enable differentiated user experience.”