Motorola's next move: it has to be a magic act

As expected, Motorola posted grim fourth quarter results Tuesday. By almost all measures, the numbers were fairly anemic. Sales in the mobile devices division were down 51 percent year-over-year. Motorola's market share has been almost halved in a year, and the division is in dire straits compared to the other major handset vendors, as this special report attests. 

Motorola co-CEO Sanjay Jha, who came aboard last August to run the ailing handset business, is not in an enviable position. He has to figure out how to turn around the division while cutting costs, facing down market pressure from competitors and dealing with a spin-off of the division itself. In reaffirming Motorola's commitment to Google's Android platform, Jha was long on generalities, as he may have to be at this stage of development, and short on details like market differentiation.

Given all of this, it seems that Motorola will have to pull off a magic act to remain relevant. It has to do more with less, and create more than just a flashy new product. Samsung and other companies are better capitalized and will have Android phones launched before Motorola. Motorola has to go beyond a mere handset offering, and conjure up something revolutionary. The only problem is, the company has provided almost no evidence, at least so far, that it is up to the task.

During the earnings conference call, Jha expounded on how Motorola would leverage its long-standing ability to work with Linux Java modules to create an Android offering that was truly differentiated, mainly around a more integrated social networking function. Samsung said recently it was looking to create something along those lines as well. So what will Motorola do?

"They didn't say they were doing anything different, better, faster, sooner than anyone else," said John Jackson, vice president of research for CCS Insight. "It may simply be that it's too early for them to come out and say something like that. But I would have expected something more provocative than that."

Jackson said both Jha and co-CEO Greg Brown laid out a pragmatic, long-term view of where the division was heading, and how it could be turned around. Brown has said in the past that it will have to be a product-led revival, but Jackson contended that a new product alone will not save Motorola--it has to be "coupled with an innovative, service-led proposition."

"It's not clear what's left available to them to really shake the market up," he said. "But I think that's going to be necessary."

Motorola cannot out-Apple Apple. Maybe it cannot even out-Palm Palm. But it has to do something extraordinary. Jha is incredibly talented and knows this. The question is: Will Motorola have the resources and enough weight within the mobile space to pull something like this off?

"They have to do something dramatic and disruptive--products alone aren't good enough," Jackson said. "It has to be something that leapfrogs the market and creates an entirely new dynamic." In other words, Jha has to dabble in some Steve Jobs-esque wizardry. Maybe there is something already in the works. Maybe 12 to 16 months from now the wireless world will be stunned by Motorola's achievement. Skepticism abounds.

"There is still the opportunity to have a tremendous success story," Jackson said. But given what was said Tuesday, "it's hard to see how it comes together." I couldn't agree more. --Phil