Motorola: Android Help on the Way

By yearend, the U.S. handset maker plans to roll out several smartphones based on the Android operating system spearheaded by Google

By Olga Kharif

Motorola's first-quarter results gave investors scant cause for glee. In the period that ended in March, Motorola smarted from a lack of customer-pleasing handsets and a loss of market share to rivals.

But Motorola (MOT) executives tried to reassure analysts and shareholders that hope is on the way—in the form of handsets sporting software created by a Google-led consortium. Before yearend, Motorola plans to introduce several mid- to high-end smartphones based on the Android operating system developed by the Google (GOOG)-backed Open Handset Alliance. "We remain on track to having Android devices in the fourth quarter, for the holiday season," Motorola co-CEO Sanjay Jha said during a conference call with investors.

The right handsets could be a salve for a company that for several years has failed to follow its best-selling Razr with equally enticing devices. Specs and photos of several handsets believed to be Motorola's Android prototypes have recently surfaced on the Web. One, reportedly code-named Calgary, features a slide-out Qwerty keyboard and a touchscreen. Another, called Ironman, is a BlackBerry-like messaging device. "Some of the devices that have leaked to the Net are pretty compelling," says Ramon Llamas, a senior research analyst at consultant IDC. "To borrow a quote from the auto industry, 'This is not your father's Oldsmobile.' [These phones aren't] Razrs anymore."

No Confirmation on Calgary

They better not be. Motorola declined to confirm that the Calgary and the Ironman are its new Android-based phones. "It is Motorola's policy not to comment on rumor or speculation," says spokeswoman Danielle McNally. However, Jha said during the call that Motorola's Android prototypes are getting a warm reception. "We are in detailed discussions with multiple carriers around the world about a few of our Android cell phones," Jha said. He added that the carriers that have seen the devices have provided "very positive" feedback.

Whether Motorola's bet on Android pays off should become clear in late 2009 or early 2010, says Mark McKechnie, an analyst at American Technology Research. "If they miss on Android, then the [money-losing] handset division is done," McKechnie says.

Motorola had to put on hold its plans to spin off the handset unit. The company is losing share to iPhone maker Apple (AAPL) and Research In Motion (RIMM), manufacturer of the BlackBerry. Competition will only stiffen in June, after the introduction of the widely anticipated Pre, by Treo maker Palm (PALM). Evidence of the share losses was widespread during the first quarter, when sales fell 28%, to $5.4 billion, missing analyst forecasts. Motorola's handset market share plummeted to 6%, based on figures released by the company. Two years ago, Motorola's global market share was about 18%.

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