NEW YORK (AdAge.com) -- Motorola's latest quarterly handset shipments sunk an astounding 50% this week, a long way down for a company that produced the country's best-selling wireless handset for three straight years.
Motorola announced yesterday that of 4,000 planned layoffs, some 3,000 workers would be from its handset unit, whose worldwide shipments in the fourth quarter totaled 19 million, half what it was a year ago. The move comes some two months after its ultra-thin clamshell Razr, which led the domestic handset market since its introduction in 2004, was displaced by Apple's iPhone as the best-selling U.S. phone in November.
Failed to keep pace
What happened to Motorola is by now an old story. Its marketing has been uneven and it's had a stream of executive departures; Motorola replaced CEO Ed Zander in late 2007 and several months later Chief Marketing Officer Kenneth C. "Casey" Keller Jr., among others, were let loose. Moreover, the company has conceded that it had too many products in the same price points and failed to keep pace with rivals in chasing the higher-margin smart phone market.
The key to saving Motorola now rests on whether the company can come up with something to rival the iPhone, which was as much a fashion statement as the Razr ever was; packed a lot more features and functions; and came at a time when carriers began wooing consumers with the world of the fast 3G network. Motorola is in bad need of more competitive handsets to stave off against not only Apple, but also Research in Motion (the maker of the BlackBerry), Samsung and others. Even Palm, which had been left for dead, is now tagged as a comeback success after unveiling its Pre smartphone at the Consumer Electronics Show last week.
Meanwhile, Motorola had been riding on the Razr's success, arguably with blinders on. "They rode it all the way from a $400 phone to zero. They had nothing to replace it with," said Avi Greenhart, an analyst with Current Analysis.
"They were stuffing the channels with a lot of Razrs ... and didn't have a platform in the smartphone market, so they were cornered into the mid-tier," said Matt Thornton with Avian Securities. "They need a much more competitive portfolio in smartphones."
Smartphone is now the fastest-growing category of mobile handsets, while feature phones, of which the Razr is an example, are becoming more commoditized and undifferentiated.
Q doesn't make a splash
At the moment, Motorola has a smartphone offering in the "Q," which hasn't made much of a splash, because it doesn't stand out from the competition. "They don't have more features, the design isn't better. There hasn't been a real reason to buy them," said Mr. Greenhart.
By all indications, Motorola is trying to fill the pipeline more aggressively and late last year said it would invest in Google's open Android platform. The company is expected to debut an Android device before the third quarter.
Even within the company, word from a person familiar with Motorola's marketing strategy is that while the outlook is uncertain, Motorola won't fade into obscurity without putting up a good fight. In its fourth-quarter campaign from Ogilvy & Mather this year, known internally as "The Last Stand," the code name for each of their phones to be introduced this year will be named after a war general, marking the final go in a handset market it may abandon if the chips don't fall in its favor.
Motorola declined to comment on that report.
In the meantime, analysts say Motorola needs to impose more discipline to its product management to deliver the goods. "This is a hit-driven business," said Mr. Thornton. "If you put out a couple of hits you'll live to see another day. There's not a lot of room for error though. Success is not a sure thing."
Making the task harder are the economic headwinds. To be sure, Motorola's competitors, including Nokia, the world's largest handset maker, and Sony Ericsson, both trimmed workers from their payrolls late last year. But if Palm can resurrect itself with a compelling smartphone, Motorola should have a fair chance of rising from the ashes.