Motorola Mobility has warned investors that more than a quarter of its device revenues come from sales to Verizon Wireless, according an annual report filed with the FCC Tuesday.
About 28 percent of Motorola’s net revenues last year stemmed from devices sold to Verizon Wireless, which is heavily invested in Motorola’s Droid franchise.
Motorola said its business could take a hit if large customers like Verizon or Sprint Nextel cut their smartphone orders in favor of competing devices from other manufacturers.
“It may be difficult to replace or find new large customers, especially with increasing concentration in the U.S. where there are a limited number of carriers,” the company wrote in its 10-K. “If any significant customer, particularly Verizon or Sprint Nextel or other large customers, such as Comcast, stopped doing business with us, or significantly reduced the level of business they do with us, it could impact our ability to service other customers using similar technology and our financial results could be negatively impacted.”
Sprint and Verizon have become increasingly important customers to Motorola over the past two years, comprising an increasing share of the company’s device sales. Verizon accounted for 17 percent of Motorola’s net device revenue in 2009, up from 13 percent in 2008. Sales to Sprint Nextel accounted for 13 percent of Motorola’s device revenue in 2009, up from 7 percent in 2008.
Motorola’s Android smartphone lineup, which includes the Droid, Droid X and Droid Pro, helped Verizon compete against the iPhone before it began carrying the device this month, putting an end to AT&T’s multi-year exclusivity arrangement.
Motorola did not specifically mention the iPhone as a risk factor in its report, but the iPhone has attracted millions of new customers to AT&T since it launched with the carrier in 2007 and some have speculated that demand for Motorola’s Droid devices could slacken after the iPhone becomes available at Verizon.
Motorola does not have any long-term exclusivity arrangements or bulk sale commitments with its carrier customers, who can cancel orders with little advance notice. More than half of its total device sales come from its top five carrier customers, including Verizon and Sprint. Motorola shipped 13.7 million Android devices last year.
Motorola Mobility recently separated from Motorola Solutions to become a stand-alone company focused on smartphones and set-top boxes, and the company warned it may be difficult to remain profitable after four years of nearly continuous losses. The company reversed a long string of losses in the fourth quarter of last year, when it posted an $80 million profit on sales of $3.4 billion.