Motorola Q4 2010/ 2011. Promises for 65% growth, Wi-Fi only and 7″ tablets in 2H
And another major player in mobile space – newly formed Motorola Mobility – came in with their Q4 and full 2010 numbers yesterday night. It’s their first earnings report as an independent company (Motorola split into two divisions – Infrastructure and Mobility earlier this year). Current Motorola Mobility has two business lines – mobile devices and home networks (set top boxes and stuff). We’ll be looking how mobile devices did.
Overall – they did pretty well.
In Q4 2010 Motorola sold 2.4 billion worth of mobile devices (including legacy dumb hones) and shipped 4.9 million smartphones – which is 33% increase in earnings compared to Q4 2009. And almost 150% increase in smartphone shipments. A pretty impressive smartphone growth, having in mind that Q4 2009 was the first quarter that Motorola really got into Android smartphone biz. Motorola earned $80 million in Q4, and significantly reduced overall loss for the 2010. They also generated $225 million positive cash flow for Q4 and $606 million for the year. Added to the $3.2 cash pile Motorola Mobility got from the split of the parent company, their financial situation seams pretty stable now.
Though it looks like Motorola missed some sales targets with Android smartphones in Q4. Sanjay Jha, Motorola Mobility CEO, admitted as much, saying that sales of mid-range Android devices in U.S. were below expectations. They were expecting that with the advent of tiered data plans, more people will start buying cheaper Android devices. That didn’t happen – U.S. consumers are still buying mostly high end Android phones.
Still, in 2011 Motorola is planning to ship 20-23 million Android devices (smartphones and tablets), which is a very respectable 43-65% growth. In U.S. they will focus mostly on a high end devices, while making more mid-tier handsets for Latin America and China.
Motorola on Verizon iPhone impact:
Verizon was the carrier that gave the biggest push to Motorola smartphones with it’s anti iPhone Droid Does campaign. Even while Verizon iPhone has not been announced in Q4 2010, by December the rumors of it’s imminent arrival reached consumers, and many of them postponed their Droid purchases waiting for the iPhone 4 on Verizon instead. As Sanjay Jha said:
Since the announcement of (VZW) iPhone we’ve seen a little slowdown in sell through of our devices, because there was clear an anticipation of some devices coming to Verizon. We have seen that effect even prior to the iPhone launch…
On tablets in 2011:
For tablets Motorola now has XOOM with Android Honeycomb, that they plan to ship late February. In the second half of 2011 Motorola will “introduce new tables, 7” and various other form factors”. Outside of U.S. Motorola plans to launch Wi-Fi only tablets, as well as 3G tablets. According to Jha, Motorola has done a lot of consumer research on tablets and it shows that there is a significant segmentation in the market:
Tablets that resonate with teenagers and kids and women, are different from the tablets that resonate with professionals who want to do enterprise services , that want to run Citrix and other capabilities on the tablet. So we definitely see good reason to introduce multiple display sizes, and price points into the market. And due to our participation in home (networking) market we see a growing opportunity… It’s a combination of TV sets, where people use these tablets in conjunction with their TV viewing experience… The tablets can be segmented also into 3G/4G vs only Wi-Fi, and whether it’s 7-8 or 10-11”. The size will make a difference… So we certainly see opportunities for different price points in tablets
Motorola is still not sure how tablet market will develop, but expects that it will have much lower carrier influence and subsidies then smartphones. E.g. right now – 50% of all tablets are Wi-Fi based with no way to generate carrier subscription. With less carrier influence will come greater competition and lower margins.
On reliance on Google, Google Experinece phone, Android updates and MOTOBLUR
Talking about solely relying on Google and the dangers of that, Sanjay Jha wasn’t worried. He’s pretty happy with Android and has no plans to add another platform to Motorola offerings. Things might be different if they were a stronger/richer company, but as things stand now – Android will be the only Moto smartphone OS for 2011.
Motorola CEO provided some interesting insights for their view of the market and strategy with Android phones. He sees two distinct categories for Android devices. Top-of the line high end Android handsets and mid-tier devices. In the “bleeding edge” category you “have to be the first or very fast follower with the latest release of software” – so Motorola creates mostly Google Experience devices, and updates them with latest Android releases pretty quickly.
In mid tier devices they see different dynamics and customer requirements, with the opportunities to differentiate via additional services and Moto Blur:
In mid-tier, most of the devices are not “Google Experience” devices. Most of them follow the trailing edge, and there we have ability to use our own software capabilities, use Blur, use enterprise capabilities, use multi-media anywhere and use phone/device diagnostics. I think that actually enables us to differentiate. In mid-tier- the brand, channel distribution become even more important… (Here) the factors that enable success are more varied and dynamics are slightly different. So as expansion moves into mid-tier I think it’s both good for Google, because they get a broader base of consumers looking for search results, it’s also good for us because we can differentiate ourselves there as well…
So there you have. Plain and simple. The high end Motorola devices – Droid 2, Droid X, Atrix etc; will have more or less untarnished Android and will get OS updates almost as soon as they are released. Mid tier – Cliqs, Defies and similar will be heavily laden will Blur and carrier crapware, and you’ll be lucky to get your Android OS updated even once.
On international expansion. It’s U.S., Latin America and China mainly. A bit of EU. And going down value chain to mass market smartphones.
Motorola does not have any big plans for Europe, and much of the rest of the world. In Europe it will continue to do what it did in 2010 – work directly through carriers in Germany, France, Italy and U.K., maybe a bit in Spain – without big marketing outlays there. All Motorola’s attention for 2011 is in U.S., China and Latin America:
At the moment our plan for Europe is to continue with the strategy we had in 2010. We‘ve launched multiple devices with multiple carriers in 4 countries – Germany, France, Italy and U.K, very modestly in Spain as well. Our plan is to continue to get traction for our portfolio in these countries. I think we are getting very good traction with XOOM tablet as well, we will continue that. We do not, as of right now, have a plan for a very large marketing investment there… I do not anticipate that in the first half of 2011 we will do anything significant. In second half there may be opportunities. What I will look for is a relationship with the carriers where we can leverage our investment dollars. If we had that opportunity I would reevaluate the second half (of the year)… It gets us into competitive disadvantage when we do go there. But we believe that given our financial situation, leveraging our dollars in the U.S., China and Latin America is a better way to go.
While U.S. remains mostly high end market for Motorola, China and Latin America is strongly mid-tier, and they are planning a heavy push there. They have a separate team in China that until now has been developing and marketing cheap mass market feature phones. And they’ve been pretty successful at that. From the second half of 2011 Motorola plans to refocus China team towards “mass market smartphones”. This team then “will go and drive our presence in low and mid-tier smartphone marketplace”.
Motorola feels that with the deployment of 3G in China and Latin America the market for low tier smartphones will become much more important very soon, and sees a lot of opportunities there.