Caroline Gabriel on Moto's Verizon Dependence ...
>> Motorola Fights to Reduce Reliance on Verizon
With 28% of Mobility's 2010 sales coming from the carrier, expect pushes into Europe
Caroline Gabriel
Rethink Wireless
22 February, 2011
rethink-wireless.com
Warnings issued by Motorola Mobility's CEO Sanjay Jha late last year made it clear that the firm was over-reliant on its flagship customer, Verizon. New regulatory filings indicate the scale of that vulnerability, showing that in 2010, the operator accounted for a huge 28% of revenues.
According to the filings, Verizon (mainly through the Wireless arm) accounted for 28% of the revenues of Motorola's mobile and set-top box activities, now separated off as Mobility.
Of course, the issue has been thrown into sharp relief by Verizon's launch of the iPhone, which Jha admitted last month had caused "some slowdown" in sales. However, a version of the Apple handset for Verizon's LTE network is unlikely this year, whereas Motorola will deliver a 4G smartphone within weeks - and this product certainly had higher profile on Verizon's stand at Mobile World Congress than the iPhone, as the carrier looks to lure users to its new services.
Motorola may also take comfort from reports that the iPad 2 could be delayed by several months - giving a longer breathing space for its own much-fancied Xoom tablet to gain market share - and that Verizon's iPhone sales have not lived up to (admittedly somewhat wild) expectations. The Boy Genius Report blog says that first week sales were disappointing. Based on figures reportedly from five Apple stores, including two "very, very prominent" locations, an initial surge in sales at Verizon - compared to AT&T - quickly subsided, from 909 on day one to 711 on day five. By day three (Sunday February 13), Verizon's iPhone sales were only slightly higher than AT&T's.
But it remains imperative that Motorola reduce its dependence on north America in general and Verizon in particular. It has some strong products in the works, notably the Xoom and the Atrix 4G for AT&T's HSPA+ network. It is showing signs of a revived interest in Europe, where it could try to make capital from Nokia's transition period. Although Jha has stuck to the line that the vendor needs to take one step at a time and will not put significant resource into Europe for the time being, the Xoom is due to launch in some countries, notably the UK via Carphone Warehouse, and a couple of Motorola handsets, such as the Defy, have been surprise hits even without significant marketing support.
It is vital that Motorola makes a strong impact with Xoom while tablet fever still rages and before iPad 2 appears. Pressure on the firm's stock has been partly down to iPhone concerns, but "more so on the back of Android/Honeycomb tablet announcements from Samsung and LG,'' according to Mark McKechnie of Gleacher & Co in a research note. He cites Jha as claiming a "three-month lead over Samsung and LG's tablets based on his understanding of their ramp plans". At MWC, Jha talked up the technical advantages of being the first 'GED' or 'Google Experience Device' as Android 3.0 was tuned specifically for Xoom so it should perform better.'' Jha also said his early reading of Verizon's iPhone launch was "encouraging" to Motorola.
The 'Europe' word also got mentioned for the first time in ages at Jha's MWC Q&A session, and he is considering bringing forward plans to the second half of this year, rather than waiting at least until 2012 to make a push into the stronghold of Nokia and Samsung. "He pointed to good traction for the midranged Defy product and possibly a greater appetite for lower end, midrange products in Europe where subsidies are lower,'' McKechnie commented. ###
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