Moto trims handsets, workforce to focus on Android

“The plan always was to spin off, but that plan was hatched before the credit crunch came along and before we realized we are in a recession phase,” Kitson said. “A sell-off is more likely, but who would want it? All the other players in the market have much more credible product portfolios. They would really want the business for its development team. They have considerable experience in handset design and software development, and if anything, that is what people would buy it for. I’m not sure anyone would want to buy the division for the Motorola brand. It’s been so damaged in the last 18 months, I’m not sure it has credibility anymore.”

Moto’s smartphone strategy may be too little, too late. Juniper forecasts that sales of smartphones will raise 95% to 300 million by 2013, helping most handset manufacturers weather the economic downturn. Kitson noted that the shape and form of these next-gen smartphones will be led by software and content, not hardware, which is Moto’s forte. Furthermore, Moto doesn’t expect to have them ready this year, raising the question of what it will do in the meantime. Charting an unknown territory like Android will mean much higher development costs at a time when competition is fiercer than ever before. But Jha said that is precisely why Moto is putting its weight behind Android. As Google and the Open Handset Alliance put their resources behind developing the Android OS and platform, Jha said Moto can focus on differentiating at the software level.

Juniper found that, overall, mobile device shipments grew by a nominal 5% to 6% at best in 2008, but key vendors are projecting a decline of up to 10% or more in 2009. Moto is now barely clinging to fifth in the global handset rankings, Kitson said. Overall, Moto saw fourth-quarter sales of $7.1 billion, bringing the year’s total to $30.1 billion in sales. The company implemented cost-reduction actions of $1.5 billion for 2009, $1.2 million of which came from mobile devices, to be completed by the second quarter. The goal for the upcoming year is that Moto’s cost savings and higher-end handsets will offset the decline in volumes and expected declines in the overall mobile device market.