Motorola has bowed to investor pressure and spun off its mobile business. Anita Davis asks how it will fare on its own Motorola's handset arm faces an uphill struggle if it is to survive as a standalone mobile brand.

The world's third largest mobile manufacturer (behind Nokia and Samsung) recently announced that it would divide into two separate companies: one that makes handsets and one that develops telecoms technology. The decision comes after a poor financial performance as the company struggled to follow up the success of its Razr phone in 2004. Full-year 2007 mobile sales were US$19bn, down 33% on 2006.

It follows pressure from shareholders to maximise profit and free the firm's technology development branch - seen as the stronger entity - from the flailing handset division in hopes of selling the latter. At the time of going to press, Videocon, India's largest consumer electronics firm, was the main contender for Motorola's mobile business.

According to Aloysius Choong, research manager of IDC Asia Pacific, mobile devices accounted for 66% of Motorola's net sales in 2006, and at the end of 2007, the figure dropped to 50%.

Yet analysts believe that Motorola still has plenty in its favour. The brand's image is "very strong and its marketing is very powerful" in Asia, said Colin Miles, co-founder of mobile content firm iPop. "It just needs to focus on the handsets and user applications for overall usability."

According to Miles, Motorola has been especially successful with its music downloading applications. In February, the company acquired Asian music provider Soundbuzz, allowing the company to extend its Moto Music platform from China to Southeast Asia and India. Moto Music offers Motorola users more than 750,000 tracks from the four major labels.

Miles said Motorola would do well to bank on its music capabilities because Motorola, like each major handset company, will have to find its own specialisation to excel. "Look at the iPhone and what it has to offer, or Nokia's content play. Motorola needs to find something similar, and it will be hard for it to change direction from music."

Choong added that, even with its brand power, Motorola may not be able to contend with the biggest phone companies and should consider more of a small-business approach. "Motorola's decline set in so quickly that there is still a strong infrastructure," he said. "It has all the hallmarks of a large company - though it may have to reconcile itself to being a smaller company."

Motorola declined to comment on the story.

Motorola... retains a strong brand image in Asia despite disappointing performance

Source: Media; Asia's Newspaper for Media, Marketing and Advertising