Is Motorola About To Repeat Nokia's Mistakes?
By Eric Lin, Wed Sep 08 23:45:00 GMT 2004

Motorola is investing a great deal of money and manpower in developing new handsets, but analysts still aren't sure the company's products will be able to compete.

Concentrating its efforts on low-end handsets, Nokia's first half 2004 handsets lacked the stylish design and mid-range features that many consumers expected. As a result, its sales suffered. However Nokia has been refocusing on design and features, introducing a variety of stylish new models. This change appears to be working as one of the first of these new models, the 6230, is in position to be Nokia's best selling model ever, despite supply shortages.

At the end of the second quarter, Motorola was seen as giving Nokia a fierce run for its money, at least in terms handset design and features, but now Merill Lynch seems to think otherwise. The investment firm has downgraded its recommendation on Motorola to neutral citing "increasing weaknesses" in its phone division. Tal Liani, an analyst at Merrill Lynch feels Moto has too much stock on hand and might not be able to turn over product fast enough to compete with the slew of handsets expected from Nokia before the end of the year.

Although Motorola is aware of what it is up against, it is no longer interested in competing with Nokia on breadth of product. Motorola has become a bit of a one trick pony, though it's been a relatively successful trick -- in the past nine months it has launched or announced at least seven models in the V series that are virtually indistinguishable from one another save for features. The recently announced RAZR is getting quite a bit of attention for its innovation, but despite it's ultra-slim shape and high-tech materials, it is still a Motorola V- series at heart. According to Motorola, this is intentional. It no longer want to be all things to all people, according to Motorola's North American chief James Burke. This is a similar strategy to what brought Sony Ericsson back into the black.

Sony Ericsson has since changed its strategy to developing a small number of unique models designed for a particular task or market segment. Like Sony Ericsson, Motorola's unified approach has worked so far, but buyers could grow weary of a product line that is too similar. Or Motorola's unified design could quickly fall out of fashion, leaving the company in lurch for appealing handsets. A.G. Edwards telecommunications analyst Greg Teets points out "It's a matter of sustaining the design edge. You lose your edge and market share drops quick and hard." Motorola is investing a great deal in design as well as developing strong media partnerships, but is it putting their development efforts in the right place?