Motorola Has a Google Phone in the Works
Despite reporting a tough quarter and sales that fell below expectations, Motorola managed to find a silver lining in the bad news: it will be the second handset provider for Google's mobile phone business.
On a conference call with analysts Thursday, Motorola (NYSE: MOT) co-CEO Sanjay Jha disclosed that the company plans to introduce 20 smartphones this year, including "one direct-to-consumer device with Google."
It would be the second phone offered by the search giant direct to consumers and bypassing the typical outlets the retail stores of consumer electronics merchants or the wireless carriers.
A spokesperson for Google (NASDAQ: GOOG) confirmed that a Motorola phone is planned but did not have any further details to offer. Jha shared the stage at Google's headquarters during the Nexus One launch where he indicated Motorola planned to work with Google on a new Nexus One model.
Google's first phone, released earlier this month, is the Nexus One, an Android-powered phone designed by HTC. While given high marks for design, there have also been complaints about the price of the unlocked version ($529) of the Nexus One, its poor 3G coverage and the inability to go into a store, pick it up, and examine it.
Consumers are apparently not keen on buying a $179 device (with two-year contract) sight unseen, and while it is an elegant-looking phone, it's yet another Android phone in a long parade of Android phones.
Both of these issues have hurt sales, as analytics firm Flurry noted. First week sales were just 20,000 units, compared to 1.6 million sold for the iPhone and 250,000 Droids sold in the first week.
Avi Greengart, research director for consumer devices at Current Analysis, said he fully expected the announcement. "Why else would Sanjay show up at the Nexus One launch, which was a phone made by his competitor? That's the most bizarre thing ever, unless this is more about Google's strategy for the Nexus retail line?" he told InternetNews.com
The real story here is Google's retail model, selling direct and only online, said Greengart. "It's much more analogous to Amazon's Kindle strategy, which is only sold online and through Amazon. But Amazon has merchandised the hell out of it. Go through the Amazon store and you see it front and center. Google has a much better Internet real estate play, its homepage but they have not promoted it in any real way."
Tough quarter for Moto
The Google news was a rare glimmer of positive news in a less than stellar earnings report. Before the start of trading, Motorola announced fourth quarter revenue dropped 20 percent year over year to $5.7 billion, while earnings per share was 6 cents a share. Analysts had expected consensus revenue of $5.94 billion and EPS of 8 cents.
Motorola is under pressure to turn its businesses around and the well-received Droid phone was expected to lead the way, but Motorola said mobile phone sales in the fourth quarter declined faster than overall revenue, down 22 percent to $1.8 billion. It shipped 12 million phones, including two million smartphones in the fourth quarter of 2009, a 37 percent decline from 19.2 million sold in the year-ago period.
Jha also said the struggling company expects to ship between 11 million to 14 million smartphones over the course of the year, with smartphones accounting for more than 50 percent of its total sales this year.