MOT Comments on Handsets, China Vendors, MSFT, and 3G Caution
(Blank Headline Received)
Wednesday February 19, 5:34 am ET
By Lucas van Grinsven
CANNES, France, Feb 19 (Reuters) - U.S.-based telecoms equipment group Motorola (NYSE:MOT - News) warned on Wednesday it was braced for another drop in handset prices, heavy competition in China and a slow take-off for third generation video phones.
The group, which is struggling to regain ground and push up profit margins in the fiercely competitive mobile handset market, also said it expected Motorola to eventually team up with U.S. software giant Microsoft (NasdaqNM:MSFT - News), which has been trying to muscle into the handset industry.
"In general, we're talking about another $4 to $5 of price erosion on average," Tom Lynch, chief of Motorola's handset division and the world's second largest behind Finland's Nokia (NOK1V.HE), told Reuters on the sidelines of 3GSM, the world's largest wireless communications trade show.
Average selling prices are closely watched because they directly impact profitability in the handset market.
Motorola's average selling prices, which are estimated by analysts to have declined by some $4 last year to $155, are under pressure as more low-end handsets are sold in emerging markets and components, such as chips, become cheaper.
"You'll see a new level of low-end phones," he said, referring to a trend to cater for mobile phone users in developing countries with lower disposable incomes.
Like its rivals, Motorola has felt the pressure of new and aggressive rivals in Asia, particularly in China, the largest mobile phone market with over 160 million subscribers.
Lynch said he was confident Motorola could hold on to its number one position there, but acknowledged that local manufacturers, which have grabbed a percentage point market share every month over the last year, would continue to grow.
"Over time the share of traditional suppliers will erode. It has started already. And we understand that we have to become nimbler," he said.
MICROSOFT SOFTWARE
Motorola last week launched the first handset based on Linux and java software and Lynch said this would be its preferred platform for a future generation of smarter phones, which will connect to email, play games and have other data applications.
"Linux/java is our core, our flagship product, but we'll also do other ones," he said, adding he expects to use Microsoft software too. "And we don't do that grudgingly. We understand they're going to be a major player," he said.
He declined to give further details.
So far South Korea's Samsung Electronics (KSE:05930.KS - News), the world's No 3 cellphone maker, is the only top five handset producer to have launched a Microsoft phone.
The top five jointly own British mobile phone software maker Symbian, seen as a bulwark against potential Microsoft attempts to gain a stranglehold on the handset industry as it has in the PC industry with its Windows operating system.
3G CAUTION
Lynch was also cautious on investing too many resources in handsets for third generation, fast mobile networks, which have started off very disappointingly in Europe and Asia.
"We have three 3G phones on our roadmap this year, and that's not going to change," he said, when asked whether Motorola would accept development subsidies from Japan's largest operator NTT DoCoMo (Tokyo:9437.T - News) to launch more 3G handsets.
DoCoMo has signed up less than 300,000 subscribers in the first 16 months of its third generation service, which enables customers to make video calls. It has recently started subsidising handset development in Japan because cellphone makers were reluctant to invest in new handsets, and is understood to be in talks with Motorola too.
"I don't think you're going to see anything for DoCoMo this year," Lynch said. "We're going to be very focused. The business model around 3G still has to evolve and it's going to be a tiny portion of our business in 2003," he said.
biz.yahoo.com |
