Motorola Is Pairing with Google on Android Phone

Motorola may be the next HTC, aligning itself with Google to offer the equivalent of the Nexus One. For Motorola, the move is a good one since the company is repositioning its business back toward profitability by focusing on Google’s Android operating system.
Motorola CEO Sanjay Jha, during the company’s fourth-quarter 2009 earnings call, said that in 2010, Motorola plans to launch “at least one direct-to-consumer device with Google.”
Google introduced the Nexus One, which runs Google’s Android operating system, on Jan. 5, offering it directly to customers, instead of the traditional through-a-carrier route, though a discount is offered with a two-year T-Mobile contract. Though HTC manufactures the smartphone, the arrangement puts Google front and center.
In all, Jha said, Motorola plans to launch at least 20 devices and to ship “between 11 million to 14 million smartphones over the course of the year, with smartphones accounting for over 50 percent of our total sales this year.”
Research firm Strategy Analytics stated in a Jan. 29 report that Motorola shipped 12 million total handsets during the fourth quarter of 2009 and 55.1 million for the year, and that its “inadequate 3G handset portfolio” made it lose out to rivals such as LG and Apple. However, analyst Neil Mawston writes in the report, Motorola has been cutting costs to restore its profitability, as well as raising the average selling prices of its handsets.
“Motorola is repositioning itself as a smartphone player, centered around the Android OS, and with its global smartphone marketshare almost doubling quarter-on-quarter to 4 percent [in the fourth quarter of 2009], the initiative has gotten off to a positive start.”
Jha said during the call that the two million smartphones Motorola sold during the fourth quarter was “almost completely Android smartphone volume.” He added that profitability for the Android phones is “meaningfully better than our traditional portfolio, our legacy portfolio.”
In a Jan. 29 research note, Broadpoint AmTech analyst March McKechnie wrote that Motorola’s Android sales were ramping up, but are offset by the fall-off of its feature phone sales.
“We estimate that each Android unit contributes [four times] the gross profit of a feature phone unit, and that 12.1 million Android units will contribute about two-thirds of the gross profits in [Motorola’s] handset division,” McKechnie wrote.
Answering a question during the call about the three tiers of pricing Motorola plans to apply to its Android phones, Jha offered, “The range is really pretty broad. I think that – I won’t give you absolute numbers, but you have certainly above $400 and potentially getting below $200. That would be the range.”
Google priced the unlocked Nexus One at $529, or at $179 with the T-Mobile contract.