Motorola Handset Sales Crash, But It's Google's Android Champ
What a strange combination of mobile facts we have today. There's been a shake-up that I mentioned was coming back in early February: RIM (RIMM) has moved into the top five mobile phone vendors, skating past Sony Ericcson and displacing Motorola (MOT), which is out of the ranking for the first time since 2004. But don't cry for Moto yet. Although unit sales are down overall, the company has ramped up smartphone sales and has become a critical force in Android handset sales -- and that's both good and bad news for Google (GOOG).
Look at Motorola's earnings release for last quarter and you see the problem that knocked it off the IDC top five. The company saw a 29 percent quarter-to-quarter decrease in handset unit sales. The reason? According to IDC's Francisco Jeronimo, Motorola fell short with Android:
"It's clear that Motorola smartphones aren't as popular as other vendors selling Android," a software that Nokia and RIM devices use, Jeronimo said. "Motorola doesn't have enough money to promote their devices and it's the same with Sony Ericsson and Palm," which all need to prove their brands will endure.However, a quick look at some numbers demonstrates this view to be exactly opposite of reality.
Back in February, Google (GOOG) CEO Eric Schmidt's said 60,000 Android handsets were shipping every day, which translated into a 5.4 million per quarter rate -- a revelation. Android was on track to surpass iPhone unit sales, possibly within 12 months. Now jump to yesterday's earnings release from Motorola. Out of 8.5 million handsets sold last quarter, 2.3 million, or over 27 percent, were smartphones. Check back to the previous quarter's earnings and you see a total of 12 million handsets sold, out of which 2 million units were smartphones. That's a 15 percent quarter-over-quarter increase, which is even more impressive when you realize that the first quarter was the holiday season. And, as Motorola indicated at the end of 2008, all its smartphones run Android.
In other words, as of last quarter, Motorola probably sold 42.6 percent of all Android handsets.If it weren't for Motorola, Schmidt would have had to boast about the 34,440 Android units that shipped each day, or just over 3 million per quarter. Hardly shabby, but it adds perspective of how critical Motorola has been to sales growth.
The problem the company faces is not weakness on the Android front, but a transition from its old and dying handset business to one centered on smartphones. In its first two quarters of smartphone sales, In its second quarter in the market segment, Motorola is selling 22 percent of RIM BlackBerry unit movement and 26 percent of Apple iPhone sales. That's impressive, and although I haven't been able to deduce Android unit movement from other handset vendors, this level of activity puts Motorola near the top, it not at the pinnacle, of Android smartphone sales.
The facts also drive three deductions, none of which is good news for Google. One is that the degree of explosive growth Android has seen is unlikely to suddenly ramp back, because I don't see another manufacturer capable of that sort of quick success readying a line of Android phones. Barring a sudden jump from those already selling Android hardware, Google won't see such a big lift again in a while.
The second piece of bad news is that without an additional Motorola-like turbo charge, Google has less resistance to new Symbian^3-based smartphones, like the powerful N8, from Nokia (NOK). Because Google doesn't control the final phone designs, it has to depend on individual manufacturers to create products that may or may not succeed.
Finally, Android's fortunes are in the hands of a company that has faced rocky times in the handset market. Jeronimo may have been wrong about Motorola's success with Android, but he is right that the company isn't in the greatest financial health. Motorola's mobile devices division had a $132 million operating loss, which is clearly better than the $192 million loss last quarter, and a vast improvement from the $509 million loss in the first quarter of 2009. But that's still significant financial weakness, and not what you want to see when a company is responsible for over 40 percent of your sales.
Cup image: RGBStock.com user katagaci, site standard license.