Are Motorola's phone days over?

As the 2008 Mobile World Congress begins, uncertainty surrounds one of the biggest names in mobile phone history. Will it stay or will it sell, and can it recapture the past success of products such as the RAZR V3?

By Simon Brew, 11 Feb 2008 at 14:12

gallery

When Motorola launched the RAZR mobile phone a few years back, its product won wide plaudits, the "Hello Moto" sound bite infectiously entered heads across the world, and the firm was soon reclaiming lost ground in the mobile phone market, clamouring back up to the number two mobile handset company in 2005, trailing only Nokia. The RAZR range was the catalyst, and it's clocked up sales of over 110 million units worldwide already, and is still selling today.

Which is why there was an air of shock, if not surprise, at the news that Motorola is considering getting out of the mobile handset business altogether.

Off the back of the firm's success in 2005 came further sales breakthroughs the year after. Buoyed by the success of the RAZR, Motorola's sales continued to boom, but not in a sustainable way. Because, and hindsight is a terrific tool, Motorola took its proverbial eye away from the proverbial ball. While it was basking in the success of the RAZR revolution, it didn't put enough into finding the next big product, or at the very least it failed to find it. And in the fast moving mobile market, that's tantermount to borderline suicide.

As such, consumers were ready for new product lines even if Motorola itself wasn't, and interest in the RAZR began to wane. Other companies seized the initiative, with the most obvious recent example being Apple with its hyper-desirable iPhone. As a result, Motorola's business proved to be too reliant on its RAZR line, and the problems mounted thereafter.

Faced with strengthened competition and no new product line of note to fight with, Motorola activated the only option really open to it - it started to cut prices. And while sales of the RAZR continued, albeit not at the same pace, all of this inevitably hit the balance sheet. In the final quarter of 2007, the handset division of Motorola reported an 84 per cent fall in quarterly profits. Its income in the final quarter of 2006 was $623 million (£312 million), and the equivalent quarter the year after saw it drop to $100 million (£50 million). Shareholders were relieved to see a profit at all, but every conceivable alarm ball has been blaring for some time.

That kind of fall instantly makes people sit up and take notice, not least when the new chief executive of Motorola went on record to suggest that turning the firm's handset division round was going to take longer than planned. And with Motorola shipping fewer units, slipping to number three in the market worldwide and offering little initial sign of a turnaround, this did not impress analysts, shareholders or the market at large.

Surprise

Yet even with this weight of troubles, the news that Motorola may consider selling off the division altogether was met with some surprise. Greg Brown, the aforementioned new chief executive, while admitting that Motorola's position would get worse before it could get better, had talked of improving the company's portfolio of products. But at the best of times it's a hugely competitive market to be playing catch-up in. Without an iPhone-beater - or equivalent - in its portfolio, there's a general feeling that Motorola will continue to struggle.