Can Motorola, one of the best known brands in the mobile industry and the maker of the best-selling Razr range of handsets, reclaim a tier one position in the cut-throat global handset industry? Should it even try?

In the second quarter, Motorola’s handset division saw its unit shipments fall by 45 percent year-on-year and its sales slip 6 percent to US$1.72 billion. Although the average selling price of its handsets was up dramatically thanks to rising sales of smartphones, Motorola’s position doesn’t look good.

The Schaumburg, Illinois-based company doesn’t make it on to analyst firm Strategy Analytics’ list of the top five global handset vendors in the second quarter – Sony Ericsson claimed the number five spot with 11 million units. Success in the mobile phone market used to be all about scale – Nokia preached with justification that high market share meant lower per unit manufacturing, distribution and marketing costs and higher margins.

But Apple and the smartphone surge suggests market share isn’t everything. Apple isn’t in the top five global handset vendors and yet its iPhones are extraordinarily profitable.

Unable to compete with Nokia and the Chinese vendors on cost, Motorola’s best bet has to be to reinvent itself as a smartphone specialist, which is exactly what it is doing. But that strategy is far from unique to Motorola – Sony-Ericsson is trying to do the same thing, while RIM, Apple and HTC already do nothing but smartphones.

Who will lead the Androids?

In its particular niche – smartphones running Android – Motorola is in a three-way battle with Sony Ericsson and HTC. While Motorola is relatively strong in North America, which accounts for two-thirds of its device sales, it lags well behind its rivals in other markets. In Europe, the Razr seems to belong to another era and the Moto brand appears to have lost much of its allure. Even in its US stronghold, Motorola is engaged in a dogfight with HTC to be the pre-eminent supplier of Verizon’s flagship range of Droid smartphones.

Worldwide, HTC appears to have some serious momentum right now. The Taiwanese company said Thursday it expects its smartphone shipments to more than double year-on-year to 6.5 million units in the third quarter, and to rise 20 percent from 5.4 million in the second quarter.

Although Motorola has given a positive outlook for the third quarter, it is clearly trailing HTC by a wide margin in the global smartphone market (Moto shipped 2.7 million smartphones in the second quarter). It does seem to be keeping pace with Sony Ericsson, but the Swedish-Japanese joint venture has slightly more scale. It saw its total handset shipments decline 25 percent year-on-year to 11 million in the second quarter. Sony Ericsson also appears to have a better geographic spread, with its largest market – western Europe – accounting for about 40 percent of sales.

Motorola is obviously right to focus its fightback on Android smartphones, which is what the market wants right now, but it looks overly-reliant on North America and its relationships with a handful of large and potentially fickle US operators. It needs to spread its bets and soon.

David Pringle

 

This article was first published on the GSMA’s Mobile World Live portal. David moderates discussion forums on the site and is a freelance media and investor relations consultant.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members