Moto's handset future in doubt

The continued presence of embattled US vendor Motorola in the global handset market looks shakier than ever, as the company reported a fourth quarter net loss of $3.6bn.

On Tuesday, Moto reported sales of $7.1bn for the final three months of 2008, down from $9.6bn in the same period last year, while loss plummeted to $3.6bn, compared to a profit of $100m in the fourth quarter 2007.

The troublesome Mobile Devices segment was to blame again, posting fourth quarter sales of $2.35bn, down 51 per cent compared with the year ago quarter. Operating loss for the handsets unit was $595m, compared to an operating loss of $388m in the year ago quarter. For the full year 2008, handset sales were down 36 per cent to $12.1bn, with an operating loss of $2.2bn, compared to an operating loss of $1.2bn in 2007.

During the fourth quarter, the company shipped 19.2 million handsets and estimates its share of the global handset market was 6.5 per cent.

The company also announced the departure of CFO Paul Liska, neglecting to say whether he jumped or was pushed. Edward Fitzpatrick, senior vice president and corporate controller, has been named to the additional role of acting chief financial officer, effective immediately. Moto has begun the search for a replacement.

Greg Brown, Motorola’s president, co-CEO and CEO of Broadband Mobility Solutions, and Sanjay Jha, co-CEO and CEO of Mobile Devices, said: “In light of the economic climate and challenges we face, we have implemented aggressive measures to reduce costs and improve financial flexibility, particularly in Mobile Devices. The cost-reduction actions underway are expected to generate aggregate savings of approximately $1.5 billion in 2009.”

But analysts were less than taken with Moto’s plan to stay in the handset space. Richard Windsor, technology specialist at Nomura Securities, said the results, “Set the scene on what must be Motorola’s last attempt at being a manufacturer of mobile phones.”

With the handset division now burning close to $2bn a year, Windsor notes that if it was a stand alone company, it would probably have filed for bankruptcy by now. And the company’s newfound focus on Android-based devices is pretty much its last chance.

New handsets based on the Android platform are still on the drawing board and are expected to hit the market in late 2009 and 2010, but Windsor believes that if “Android fails to deliver the needed revenue and profit recovery, then the focus will be oriented on managing the business for oblivion.”

The analyst also warns that Android is not the panacea it is sometimes pitched to be, “As there is no guarantee of compatibility between different implementations and the platform has been shown to be exceptionally insecure.Time will tell whether Motorola can develop a differentiated and compelling user experience on Android but if history is a guide, the signs are not good.”