From one perspective, Motorola (NYSE:MMI) had a pretty decent fourth quarter. Revenue from mobile devices—including smartphones, feature phones, tablets, and other goods—came to $2.5 billion, up 5% from the same period in 2010. Net revenue for the year was up 14% year-on-year, totaling more than $13 billion. The Droid RAZR, the smartphone heir to Motorola’s single most successful device, helped the company’s quarterly smartphone sales grow 62% year-on-year.
Of course from another perspective, there’s not much to celebrate here. Smartphone sales may have seen a nice bump over the previous year, but Motorola still sold only 5.3 million smartphones over the period. That doesn’t compare favorably to the 37 million iPhones Apple (NASDAQ:AAPL) sold and the 36.5 million sold by Samsung (PINK:SSNLF). Even the industry’s favorite whipping boy, Nokia (NYSE:NOK), sold 20 million smartphones over the fourth quarter.
Motorola just can’t compete with the big boys anymore. There was more bad news as well. When all was said and done, the company reported a loss of $80 million, a loss attributed to write-off costs preparing for the company’s acquisition by Google (NASDAQ:GOOG).
Motorola’s tablet business is moribund. Its smartphone business is growing, but has little momentum. What future is there for Motorola Mobility? Here are three possibilities.
The great Google selloff
The popular consensus is that Google is going to milk Motorola for its lucrative mobile technology patents and then sell off the company’s device business to whomever is buying. Motorola certainly has an appealing patent portfolio, with more than 17,000 in its stable and many more pending. Here’s the thing: Analysts such as Morgan Stanley value Motorola’s patents only at around $2 billion to $3 billion. Google is spending $12.5 billion on the company, so there has to be more going on. There are conflicting messages, though. While Google has coyly said it isn’t interested being a hardware company and that Motorola will run “independently so it will not violate the openness of Android,” it has made other comments that suggest it has grander designs.
The great Google experiment
Even as Google’s denied it, CEO Eric Schmidt himself has suggested that Google is going to leverage Motorola to enter the hardware market. Speaking at the Salesforce.com Dreamforce conference in September, just weeks after the acquisition was announced, Schmidt said, “We actually believe that the Motorola team has some amazing products coming… We’re excited to have the product line, to use the Motorola brand, the product architecture, the engineers.” With rumors swirling that Google is going to enter the tablet market to directly compete in the sector with Apple and Amazon (NASDAQ:AMZN), it seems more likely than not that it will use the manufacturer it owns rather than another party. Motorola’s Xoom tablets have failed miserably at retail—the company sold just 200,000 over the fourth quarter—but with Google working on the device with Motorola, it may have a winner.
The unexpected turnaround
There is also the possibility that not much will change once Google takes control of Motorola. It may allow the company to continue operating as it has and it will use the company’s library of patents to defend Android devices from litigation-crazed competitors like Apple. If this happens, there is always the possibility that consumers will click with Motorola’s goods again.
Motorola said at the International Consumer Electronics Show earlier in January that it plans to release fewer phones throughout 2012, allowing the new Droid RAZR phones some room to breathe in the market. There was a time when Motorola sold 130 million RAZR feature phones in three years. Consumers being fickle beasts, the company’s new RAZR smartphones could click, guaranteeing Motorola a place at Google’s side.