Telecom & Wireless

More Competition For Motorola

Douglas A. McIntyre

There is no rule about kicking companies when they are down, and Motorola (MOT) is figuring that out.

Recently Samsung caught MOT in global market share, at about 15%. Nokia (NOK) is the leader with over 36%. In fourth place sits Sony-Ericsson.

Sony-Ericsson has always been a large niche player with 9% of the market. It is highly profitable becuase it concentrates on upper end phones with multimedia capacity and cameras. It has never been a threat in huge markets like India and China because its handsets cost too much.

That is changing. According to The Wall Street Journal, Sony-Ericsson is releasing a number of low end products aimed at emerging markets.

The first two things that this says are that the No.4 handset company is willing to give up operating margins to expand revenue. The cheap phones just don’t pay-off as well at the bottom line. The second aspect of Sony-Ericsson’s decision is that it needs to take share from Nokia in the emerging markets world. In some of these countries Nokia has over half the market.

But, Nokai will do just fine. Its stock is at a six year high and its has just launched a music service and handsets to go after the Apple (AAPL) iPod and iPhone.

The company that cannot take having another handset operation with a broad range of products is Motorola (MOT). The Sony-Ericsson move means that the US company now has new competition at both ends of the market, which will makes its turnaround much more difficult.

Who said life was fair.

Douglas A. McIntyre