Motorola to Pare Down Staff, Mobile OS Support

Motorola and Google Android

Embattled No. 3 mobile phone maker Motorola is expected to announce layoffs and a restructuring of its mobile platform strategy during its third-quarter earnings report tomorrow.

According to today’s Wall Street Journal the Schaumberg, Illinois-based company is dumping three of its mobile operating systems to focus on Windows Mobile, Android and P2K OS, its proprietary Linux-based platform. Motorola also has used Qualcomm’s BREW, Nokia-owned Symbian and the Symbian-based UIQ.

Motorola is also expected to lay off an undetermined number of employees as part of its mobile division spin-off, scheduled to happen next year. Motorola (NYSE: MOT) did not return calls or e-mail inquiries by press time.

The published report didn’t surprise industry analysts, who are anticipating disappointing results tomorrow on mobile device revenue and sales.

“I expect we’ll see further decline in the mobile business, as they have not put out any significant higher-end mobile device and overall the brand is suffering,” Ken Dulaney, an analyst at Gartner, told

The news comes as Motorola scrambles to remain competitive in a market dominated by smartphones from Nokia and Samsung, and increasingly by Research in Motion (RIM) and Apple. The impact of Google’s recent foray into the market with the open source Android platform also remains unclear. Google (NASDAQ: GOOG) and T-Mobile last week debut the first Android-based smartphone, the HTC G1.

Tomorrow’s financial report should shed light on what Motorola co-CEO Sanjay Jha has planned for his mobile division after three months on the job. Jha was appointed to the post in August as part of Motorola’s plan to spin-off its mobile division to improve profitability.

The company hasn’t been wholly idle since then. Earlier this month, Motorola debuted the Krave, a smartphone built on its proprietary OS that became its first U.S. mobile device featuring a touchscreen navigation system similar to the Apple (NASDAQ: AAPL) iPhone.

But it’s reducing mobile platforms that Dulaney and other observers say is a key step — and long overdue.

“They’ve just had too many platforms and they’ve been under pressure to reduce them as they’re facing a crisis in software,” Dulaney said, adding that he hopes Motorola will also step up its support of Android, given its openness and its lack of license fee costs.

Android was designed by the Google-led Open Handset Alliance (OHA). Some industry watchers believe it has the potential to replace the operating systems now used in hundreds of mobile phones, particularly those below the standards of a full-featured smartphone.

Motorola is reportedly not unaware of Android’s potential. The company is thought to be beefing up its Android development team. A Motorola spokesperson earlier described Android as “one of the most powerful, flexible and customizable open platforms, enabling truly integrated mobile hardware, software and Web experiences.”

Adopting it may pay off for Motorola, Dulaney said.

“It could be the consumer platform for them. But they need to stick with Windows Mobile for the enterprise market,” he added.

Ryan Reith, an analyst at IDC, likewise told that while fewer platforms is a good strategy, Motorola should also be focused on Windows Mobile just as much as Android.

“Motorola has to diversify and offer products from low-end to high-end,” Reith said. “There has just been a lot of confusion in their mobile device roadmap this past year.” He added that he expects Jha to make changes in hardware, such as bringing in new chipsets to support greater smartphone capabilities.

The top challenge, according to another expert, is whether Motorola can produce another hit on par with its earlier, massively successful RAZR, which could help it compete fully with Apple’s iPhone, the steady stream of BlackBerry devices and the G1.

The all-metal RAZR, which debuted in 2003, was Motorola’s last blockbuster product, selling 110 million units in the first four years.

In contrast, Apple sold 6.9 million iPhones in the third quarter of this year, outstripping the 6.1 million Apple sold of the first-generation iPhone, which was on the market for over a year. Morgan Stanley expects 27 million iPhones to be sold during calendar year 2009.

“Motorola’s challenge is building relevant devices that can compete,” Jack Gold, an analyst at J.Gold Associates, told Gold said he expects Motorola to push out Android-based devices by early next year, but said that’s just a start in rebuilding the Motorola brand among mobile devices.

“Having Android alone is not enough, as it must also be a compelling device that users want to buy,” Gold said.

“I think Motorola is a Tale of Two Cities — as it is the best of times in terms of its enterprise and infrastructure business, and it is the worst of times when we’re talking handsets,” Gold added. “The big question is whether it can improve its handset division.”

Telecom analyst Jeff Kagan agreed that Motorola faces challenges in handset development and surviving today’s shaky macroeconomic climate.

“Motorola has shown some signs that it may be moving in the right direction,” Kagan said. “Unfortunately, the marketplace and economy is slowing right now, which confuses the matter. If Motorola can jump back on the wagon as the market turns back, they could be on the right track once again. But we have to watch and see.”

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