Moto CEO: 'Competitive dynamic' at Verizon could drag on Q1 results

Motorola (NYSE:MOT) co-CEO Sanjay Jha warned that Verizon Wireless' (NYSE:VZ) competitive actions in the first quarter of next year could have "an impact" on Motorola's financial results during the period. Although Jha did not provide additional financial specifics, he said Motorola is working to minimize the problem by expanding its smartphone distribution with additional U.S. carriers including AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and T-Mobile USA.

Verizon is widely expected to begin selling the Apple (NASDAQ:AAPL) iPhone early next year.

Speaking at the Credit Suisse 2010 Technology Conference, Jha said that the first quarter is typically a slow one for most of the world's handset makers. However, he said that "at Verizon, there is a competitive dynamic developing there, which may have an impact given our strong relationship with Verizon. I think that may have an impact on our first quarter."

Jha said Motorola will shift its product mix to additional carriers in order to deflect the issue, and he added that the action would affect gross margins.

"We're diversifying amongst carriers in the United States," Jha said. "You will see a much broader portfolio with AT&T. At Sprint, I hope to be able to deliver more products, and at T-Mobile we've of course had a relationship for a long period of time. "

Jha said the diversification would result in a "loft" in Motorola's mobile devices business in the first quarter. He did not provide further details.

Verizon has been working to expand its smartphone lineup with the help of vendors including HTC, Samsung and others. Further, a number of major media outlets have reported the carrier, the nation's largest, inked an agreement with Apple to sell the firm's iPhone, likely starting in January. Financial analysts have expressed concern over Motorola's possible over-reliance on Verizon as a distribution channel for its smartphones--Motorola sells a number of Android-powered gadgets through Verizon under the carrier's "Droid" franchise. Further, rumors continue to swirl of various Motorola devices, including the Olympus, heading toward AT&T in the coming months.

In the third quarter, Motorola's handset unit posted its first operating profit in more than three years.

Interestingly, Jha also offered a few additional tidbits on Motorola's tablet plans. "We're planning to participate quite fully in that category," Jha said of tablets. "We will participate in both the 10-inch and 7-inch tablet space."

Jha explained that business users gravitate toward tablets with larger screens, while consumers likely will prefer smaller, 7-inch gadgets.

The launch of Motorola's tablet efforts could coincide with a forthcoming service the company said will allow users to stream video to devices including tablets and mobile phones--a service that would leverage Motorola's mobile device and set-top box business units. Speaking at the Reuters Global Media Summit, Motorola's Daniel Moloney said the vendor will showcase the technology early next year at the Consumer Electronics Show. According to a Reuters article, Moloney, who is president of Motorola Mobility, said the offering would represent the first step in Motorola's plans to allow users to view content on whatever device they wish.

Jha, at the Credit Suisse 2010 Technology Conference, also addressed the rapid pace of competition among tablet vendors. Specifically, he noted that a number of new tablet players are in a "race to the bottom" in terms of pricing for tablets. "You will not see us in that race to the bottom," Jha said.

Finally, Jha lauded Motorola's progress in the smartphone area, and promised the company would gain additional market share in the coming year. He said the company would do so through both hardware and software innovations, and pointed to the company's MotoBLUR service as an example. MotoBLUR sits atop Android and provides users with social networking updates. Jha said Motorola counts more than 4 million MotoBLUR users.

As for 4G? "I will have 4G devices in the marketplace early next year," Jha promised, without providing details.

For more:
- see this Reuters article
- see this Motorola webcast

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