Motorola clings to third place in mobile market

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Motorola clung to third place in the mobile phone market in the second quarter, shipping 28.1 million handsets and maintaining its market share, the company said Thursday as it announced its financial results for the second quarter.

In comparison, Nokia shipped 122 million mobile devices, Samsung Electronics 45.7 million phones and fourth-placed LG Electronics 27.7 million during the same period, according to figures supplied by the companies.

While unit shipments rose, Motorola's revenue from its struggling handset business fell 22 percent year on year, to US$3.3 billion, and the division's operating loss widened to $346 million from $332 million a year ago.

Although the company held on to market share in the second quarter, it expects a small decline in the third quarter.

"Q2 was strong in North America. We even gained share there," CEO Greg Brown said in a conference call with analysts.

Brown credited the introduction of a new mid-range smartphone, the W755, for the second-quarter gain there.

However, Motorola's offering is weak at the upper end of the smartphone market, where it is under pressure from Apple, which launched the iPhone 3G on July 11, and from rivals Samsung and LG, which are strong in North America, said Geoff Blaber, director of devices and platforms at market analyst CCS Insight.

The company as a whole generated revenue of $8.1 billion for the quarter, down from $8.7 billion a year earlier. Net income rose to $4 million compared to a net loss of $28 million a year earlier.

Revenue at Motorola's home and networks mobility division, which sells set-top boxes, broadband modems and WiMax equipment, grew 7 percent year on year to $2.7 billion, and operating profit rose 28 percent to $245 million. Consumer demand for high-definition television services contributed to the growth.

In the enterprise mobility solutions division, revenue rose 6 percent to $2 billion and operating profit climbed 24 percent to $377 million, boosted by demand for enterprise and public safety networks from outside the U.S.

Motorola is still working on plans to spin out its loss-making mobile phone division as a separate company ahead of a sale around the third quarter of next year.

Brown believes the division will fare better on its own, with a capital structure and management team better matched to a market focused on software and user experience rather than hardware.

But before the sale can take place, "We need to improve the profitability of mobile devices," he said.

That will be difficult with the company's current product range, on which it loses an average of $12 per phone sold, said Blaber.

"Their W series in the mid and low tier is quite strong. Their difficulty is they don't have the mid and high-end products to reach the price point necessary," he said.

To make matters worse, he said, "Nokia, in the last week, has implemented a number of very aggressive price cuts. Competing with the scale of Nokia is getting harder and harder."

Disentangling the mobile phone business from the Motorola's other activities "is going to cause a lot of disruption in the short term when they have all these other challenges on their plate," Blaber said.

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