Wednesday, July 19, 2006

Does Motorola Have Nokia's Number?

BusinessWeek reports that Motorola (MOT) "announced record quarterly sales of $10.9 billion for the period ending in June, up 29% compared to the $8.4 billion in the second quarter of last year. Net earnings were $1.4 billion, up nearly 45% over last year. And once again, the phone unit led the way. Motorola's mobile-devices segment saw sales soar 46%, to $7.1 billion over a year ago. And its operating earnings increased 62%, from $493 million to $799 million."

The article notes that "Motorola continued to boost its global market share, gaining ground for the seventh consecutive quarter and edging ever closer to its chief phone rival Nokia (NOK ). Motorola now pegs its share at 22%. That's up from about 17% a year ago and from 20.7% in the last quarter. Nokia, which will release its second-quarter financials June 20, lead the industry with 33.3% of the market through the first quarter," according to Strategy Analytics.

According to the article, Motorola "shipped 52 million handsets in the second quarter, up 53% over the previous year and 12.4% over the first quarter of 2006. Nokia certainly sells more phones, an estimated 80 million in the second quarter. But that's 6.5% more than it shipped in the first quarter and 31% more than it shipped in the second quarter of last year. If Motorola manages to keep doubling Nokia's growth rate it can close the gap in a few years."

Matthew Hoffman at Cowan & Co said, "Moto will probably reduce the gap more, but catching Nokia is going to be tough."

On the subject of Motorola being behind in term of handsets that can take advantage of 3G networks, Hoffman ssaid, "At this point we are waiting for products that are in the pipeline. We don't know if they are delayed or if it's simply that they haven't shown them yet."

Hoffman thought Nokia's 4-GB phone shows "they get it." Her said, "Motorola has to prove with product introductions that they understand 3G concepts."

In terms of emerging markets, Motorola is palying catch up to Nokia. Forrester analyst Charles Golvin said, "The big battle for share is going to be in the emerging markets. It will come from the low end, and the winner will be the one that can deliver 30 to 40 handsets to those markets."

And following up on the RAZR's huge success might be an issue. Golvin said, "They haven't had a phone with the wow factor that the RAZR had."