Motorola Android Strategy Pays Off as Smartphone Sales Rise

Motorola's device segment continues to keep its focus on Android, a mobility strategy that rewarded the company with increased smartphone sales during the second quarter, despite overall sales falling 6 percent.

Motorola continues to align its smartphone business with Google's Android operating system, and while the strategy is one that analysts, and the market, have encouraged, Motorola has yet to fully reap the results.

In a July 29 announcement on its second-quarter earnings, Motorola showed a sixfold increase in profits-up to $162 million-though sales in its mobile device segment slipped 6 percent from a year ago, to $1.7 billion.

Still, it managed to increase the number of smartphones it shipped worldwide. While in the first quarter Motorola launched six handsets running the Android operating system and saw shipment totals of 2.3 million smartphones and 8.5 million total handsets, during the second quarter its smartphone tally jumped to 2.7 million units, though total handset sales fell to 8.3 million units.

Most notable among its second-quarter launches was the Droid X-an Android-running smartphone with a 1GHz processor and 4.3-inch display that appeared to be poised to take advantage of several factors. Namely, that Apple had been put on the defensive regarding the iPhone 4's antenna design, and HTC was suffering shortages of its popular Droid Incredible and Evo 4G handsets. In the end, however, Motorola-and carrier partner Verizon Wireless-likewise felt the pinch of shortages, as suppliers that had dialed down production during the worst of 2009's recession raced to increase production again and fill piling-up orders.

"The Droid X launch has been very well received and is seen as one of the best smartphones in the market today, with a 4.3-inch high-resolution display, Adobe Flash and an 8-megapixel camera," Motorola Co-CEO Sanjay Jha said in July 29 statement. "As we continue to execute on our business strategy, we are in a strong position to continue improving our share in the rapidly growing smartphone market and improving our operating performance."

The smartphone market enjoyed 21.7 percent growth during the first quarter of 2010. Tellingly, competitor Research In Motion, with its exclusive focus on smartphones, rose to tie Sony Ericsson for fourth place, knocking Motorola out of the top-five list of worldwide phone makers, according to an April 29 report from IDC.

Commenting on the current shortage of Droid X smartphones, Jha emphasized the widespread nature of the problem, later telling the Wall Street Journal, "We're not missing from the marketplace, but demand is slightly higher than we anticipated. We have managed it as well as anyone else."

In addition to the Droid X, during the second quarter Motorola launched the Flipout and the Charm-both running Android-as well as the world's first Android push-to-talk phone, the more enterprise-geared Motorola i1 on the Sprint Nextel network. In Argentina, Brazil and Mexico, it also increased the number of Android applications in its mobile application storefront.

Jha said during the earnings conference call with analysts and media that he expects supplies to catch up with demand during this new quarter. "Our supplies are still relatively healthy," he insisted, "it's just that demand is outstripping those supplies."