Oh no, Moto. The fourth quarter gave Motorola a beating. Amid fierce global competition and falling handset prices, the vendor reported that its fourth-quarter profit fell 48 percent, and it will cut 3,500 jobs to try and improve operating costs.
Analysts said a combination of playing deeper in emerging markets plus Motorola's move to cut prices to keep competitors at bay in the high-end segment of the market contributed to the dismal profits.
Goldman Sachs found that certain new Motorola handset models in Europe have seen as much as a 20 percent drop in price during the last two months, compared with 5 to 10 percent for several new Nokia devices. In short, the RAZR, which powered Motorola's financial results throughout 2005 and much of 2006, isn't a key differentiator for Motorola anymore, and the subsequent release of the KRZR and other models failed to pick up the slack. In addition, vendors like Samsung, LG and Nokia have caught up when it comes to ultra-thin phones.
The puttering out of the RAZR is eerily reminiscent of Motorola's success with the StarTac phone in the late 1990s. The first clam-shell wearable phone the industry had ever seen reinvigorated Motorola's sales after it lost market share to Nokia when it failed to transition from analog to digital technology fast enough. However, Motorola rode the StarTac train too long as competitors came out with the same design and began hitting the market with more feature-rich phones. By 2003, Motorola was missing in action again when it came to competing with rivals with features that were resonating with customers, such as phones with embedded cameras.
Did Motorola ride the RAZR train too long? It really tried to follow this blockbuster with models like the Motorola Q and the KRZR. It wasn't sitting still. But its follow-up models just weren't ones that were a radical departure from what consumers were seeing at that point. When the RAZR came in 2005, it definitely represented a major paradigm shift for the entire handset market.
Motorola's slump is not likely something it can get out of quickly. Analysts are calling for some heavy price competition now that Motorola is on a bit of an equal plane with its handset offerings and as vendors battle it out for a share of the emerging market. It's under pressure to innovate while keeping costs down.
And it doesn't sound like Motorola has too much in terms of innovative designs up its sleeve for 2007. During his keynote address at the Consumer Electronics Show earlier this month, CEO Ed Zander outlined a company that is aiming to provide "cool experiences" anywhere and anytime. He revealed several new Motorola innovations, including Yahoo Go for cell phones and a Flickr widget that will enable users to upload photos. He also introduced the Motorizr Z6, a slider music phone that employs Microsoft's digital rights management.
It's going to take more than "cool experiences" to give Motorola the momentum it had with the RAZR. People like cool and innovative phones. That's why the iPhone will become the new RAZR in 2007. It's a radical departure from what the market is already accustomed to.
On another note, Alltel's introduction of CellTop, its exclusive patent-pending user interface technology promising subscribers improved access and management over their mobile content experience, is interesting on several fronts. First, it's a project that Alltel has been working on for more than a year to improve discovery of content. It's refreshing to see Alltel take such a proactive stance rather than waiting for its handset partners to do something about making discovery easier. Last summer, Alltel made a deal with Digit Wireless to incorporate the company's Fastap one-touch keypad technology, which is designed to enable easier discovery, access and use of mobile applications and services through easier text entry and enhanced access-control functionality.
CellTop is essentially a collection of modular "cells" that act as shortcuts to standard-issue mobile applications like weather updates, ringtones and text messaging. I've been testing it for more than a month now, and I believe it will attract users beyond the typical 18-to-35-year-old crowd to mobile data. It's evident that people with no familiarity with mobile data could pick up this device and know what to do. No, simplified navigation is not the single Holy Grail to mobile-data adoption, but it is a hefty start. Take statistics from Canada's Telus Mobility, which adopted Fastap technology long before Alltel did. Telus said customers who owned the Fastap-enabled phones used on average 116 percent more text messaging as compared with those who purchased a comparable 12-button handset. This increase was sustained over a 12-month period. In addition, overall data ARPU was 97 percent higher for Fastap users compared with non-users, with browser penetration 53 percent higher. -Lynnette