Motorola just cut its earnings projections, with a lot of the blame placed on Moto troubles.


In The New York Times :

The company said it had tried to gain market share too aggressively, instead of focusing on better profit margins and innovative new features. Phones like the RAZR, which once sold for hundreds of dollars, are now offered for as little as US$30 at many mobile phone stores.

"We got away from what made us successful in 2004 and 2005," Edward J. Zander, Motorola's chief executive, said in an interview. "You get an appetite for market share. But you have to make sure you have the underpinnings and cost structure to go after it."

In discussing the earnings shortfall in a conference call with Wall Street analysts yesterday afternoon, Zander said the company was also hurt on both ends of the mobile phone industry. In the market for cheaper, sub-US$40 phones that do particularly well in developing markets, the company failed to build phones that could return significant profit.

The "Motofone", a low-cost handset the company had high hopes for is not hitting the numbers it was looking for. Flextronics and Foxconn, Taiwan companies, put these babies together for Moto. They said they are impacted by any strategy adjustment and are holding off on expansion plans related to the business. A new initiative "Long Beach Island" (NJ shore?), is expected to mark a shift to a new low-cost line. It is aiming high, once again, for sales of the low-reaching handsets. But this time, production will go to Taiwan's Compal.

The mobile business is notoriously cutthroat with "RazrThin" margins and too many fickle customers in too many fragmented markets.

Moto has made great strides in the last few years, getting cred for design and functionality. But as we've seen with Sony and Ericsson needing to wed, BenQ-Siemens, and weak profits for phone-centric BUs, it's a really tough business.

Motorola needs a blockbuster to retain the upscale brand focus. We're all sure they have it in them. Apple can't be the only cool kid on the block. But, just as Moto has learned a lot from the Cupertino school of product innovation strategy, it should heed another lesson taught by Professor Jobs: Stay out of the gutter. Apple is not a discount brand.

More to come.
-jag

 

slockums
Level:

zaki572
Level:

zzana300872
Level:

clarejoan
Level:

sherriton
Level: