It’s a critical time for Motorola. The company is planning to split itself in two early next year. Together with the company’s set-top box unit, Motorola’s long-struggling handset business will have to stand on its own two feet after being helped along for years by the success of Motorola’s networks and enterprise mobility segments.
For some perspective on just how dependent Motorola’s handset business has been on the company’s other segments, think about this: The second quarter of this year marked the first time since December 2006 that Motorola’s handset division posted an operating profit. (Although the division is still in the red on a non-GAAP basis.) The company’s handset division lost $1.07 billion in 2009, $2.2 billion in 2008 and $1.2 billion in 2007 after earning Motorola $2.69 billion in 2006 due in part to the success of the Razr.
Whether the unit will stay afloat once its cut out of its corporate life vest depends a lot on Motorola’s ability to gain marketing support of the operators carrying its phones and its ability to successfully compete against other handset makers that are banking on the Android OS for their path to success.
Samsung, HTC and LG are all elbowing in on the Android game, to name a few. As their devices begin to gain momentum, as Samsung and HTC have already done with Sprint, they could threaten Motorola’s ability to snag the type of high-profile marketing that has helped launch its Droid devices into the stratosphere and keep its handset business afloat.
Sanjay Jha, who will head up Motorola Mobility when it breaks off from the enterprise mobility and iDEN businesses in the first quarter of 2011, said in a call today that while he felt good about the trajectory of Motorola’s smartphone growth, there was a “tremendous amount of uncertainly about the competitive landscape.” Depending on your point of view, that comment is either characteristically conservative or a vast understatement.
Motorola’s handset unit is facing component shortages threatening supply of its latest hallmark device, the Droid X, and its performance over the past few years doesn’t bode well for its ability to stay above water. If the unit continues to show a profit over the next six months, perhaps its independence will be a success. After all, once the company splits in two, Motorola Mobility won’t be able to depend on its more successful big brothers for support.