Motorola told investors yesterday that it expects a recovery in the second half of 2007 after suffering from a 48-percent drop in net income during the fourth quarter as it pursued market share over growth [1]. CFO David Devonshire admitted to attendees of the Bank of America's technology conference that "the straight strategy for market share got us trouble in the fourth quarter." The CFO also acknowledged that one problem was the decision to lower the RAZR's price, which not only hurt the profitability of that model but other models too.
Analysts at Goldman Sachs said that certain new Motorola handset models in Europe had seen as much as a 20 percent drop in price during the fourth quarter, compared with 5 percent to 10 percent for several new Nokia devices. In short, the RAZR stopped being a key differentiator for Motorola, and the subsequent release of the KRZR failed to pick up the slack. But Devonshire debunks the notion that the KRZR hasn't sold well. He said Motorola sold more than 2 million units of the KRZR during the fourth quarter and that the model continues to sell well. But it doesn't sound like those sales are enough to propel Motorola out of its slump. According to Devonshire: "I think we'll have a couple of rocky quarters. I'm not looking for anything that big. I do think that in the second half of the year you'll see some improvements." By the way, Devonshire also said he didn't know why Ron Garriques resigned as head of Motorola's mobile-phone business, but said that a change was clearly needed.
For more about Motorola's hopes for a turnaround:
- read this article [2] from the Wall Street Journal
Links:
[1] http://www.fiercewireless.com/story/motorola-bigger-marketshare-lower-profits/2007-01-19
[2] http://online.wsj.com/article/SB117210720701615580.html?mod=telecommunications_primary_hs