Motorola (MOT) has not introduced a successful handset since the Razr three years ago. Its global market share has dropped from 22% to 12% in just a few quarters. The firm had nothing to match the Apple (AAPL) iPhone, the RIM (RIMM) Blackberry, or the best parts of the Nokia (NOK) model line. Its cell phone business began to lose hundreds of millions of dollars.
To make matters worse, the firm’s stock dropped from $26 in October 2006 to its current level of $5
Motorola’s solution to its trouble is unique and ridiculous. It will take its largest operation, which is still handsets, and break that off from the smaller, profitable divisions the company runs. Shareholders will get stock in each of the operations. The problems is that the value of the MOT phone business is probably zero. Unless it is given a balance sheet with several billion dollars, all that it has is falling revenue and huge losses.
The new CEO of Motorola’s handset company, Sanjay Jha, intends to use the new Google (GOOG) Android operating system in his phones. The software is currently being sold by T-Mobile, the least successful cell carrier in the US. Beyond that endorsement, Google has nothing.
Jha has to grasp at straws because he has no other option. Because Android is open source software, developers may decide to use it to build mobile applications. With Motorola and T-Mobile as the only distributors of the OS, that appears unlikely.
MOT’s handset business is already dead. Using Google software in its products won’t resurrect it.
Douglas A. McIntyre
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