Motorola's recent profits warning, in which it warned that handset shipments will down 32% over the year giving rise to revenues $0.75bn down on the previous guidance make "horrible reading", according to a note from Martin Garner, Director of Wireless Intelligence at Ovum.
Motorola said the company will make an operating loss of 2-4 cents per share, compared to the guidance of a profit of 2 cents per share, an further said that it does not now expect its handset division to return to profitability this year.
Garner's said he wouldn't be surprised to see the company slip to a number four position in the market, and commented, " The steepness of the fall at Motorola is scary. Up until Q4 06 shipments had been on a strong upward trend. This quarter shipments are down 47% on Q4 06 when you would normally expect them to be up 5-10%.
In our view the biggest single problem is the product portfolio, which is under siege in all segments across most of the world. One aspect of that is that Motorola has had a rather US-centric view of what its portfolio should look like – fine for selling in the US, but not fine elsewhere. Motorola has completely missed the Nokia N-Series charge and the Sony Ericsson lead-experience success.
It is now trying to put that right with devices like the Z8 'media monster', but we have seen no evidence yet of a coherent push to repair the damage, nor any sign that Motorola is currently able to differentiate in any segment (as it did with the RAZR) by creating something truly new."
As for Sony Ericsson, which posted decent sales numbers but disappointed some analysts by marginally underperformaing against forecasts, Garner said, "The drop in average sale price is less important than the profit margin. The average profit per phone grew strongly in H1 2006 from 13.4 to 21.9 with the success of the K800, but has now fallen back to the level of a year ago."
But he added that he thought the margin should recover as a number of high and mid end products enter the market over the coming months. He did caution that Sony Ericsson has a weakness at that top end of its portfolio, where it is taking a beating from Nokia's N series of devices.