Motorola Looks Far Better than Other Mobile Internet Players

We’ve had a focused Mobile Internet theme for the last two years or so and the initial focus has been on Apple (AAPL), Research in Motion (RIMM), Google (GOOG) and even Palm (PALM) as a “special situation.” Needless to say these stocks and this theme have been on center stage for some time.

After looking at the first new products from Motorola based on Android, we have officially put them on the list. Motorola is a major global player despite stumbling very badly in the years following the introduction of the hit Razr phone. (We still have one for pre-paid cards in strange places and it remains an excellent phone even by modern standards.)

After bringing in a new CEO to focus on the phone business and build it on top of the Google Android platform, it appears that Motorola has not bumbled this time. The value-added software makes the mobile device a powerful networking and communication tool which is what it has become in the last year.

Although being on Android can “cut both ways” in terms of value-add versus commoditization, it’s far better than trying to build on a niche OS. This is where Palm is at a major disadvantage with WebOS and Research In Motion may find themselves in a similar state if Android and Apple come to dominate the mobile Internet OS.

The one thing we can say for Motorola is that they have proven that they at least understand what is going on in the modern world of the mobile Internet and have demonstrated some execution around that vision. This is far more than we can say for Nokia (NOK) who so far appears clueless about what is going on despite the success of devices like the iPhone and the Blackberry.

From a stock standpoint, Motorola is also much more interesting than the others at these levels. Apple, Research in Motion and Palm have all had very nice runs and trade at fairly high multiples. At this point few doubt the industry positions of Apple and Research in Motion and those stocks trade at levels with that expectation baked in. Although Motorola has moved up of late, they still have much to prove and the stock has a way to go before one would say that a leading market position has been factored into the shares.

We would avoid Palm for now. The current price reflects our estimate of True Value and with increasing competition, the ability for Palm to produce more upside surprises may be difficult. The fact that there are already so many shares of Palm sold short may be the one thing that keeps the shares from going down if things don’t continue to improve for them.

The glimpse Motorola is giving into their mobile Internet plan is very positive and if they can continue to execute on it the shares remain a bargain. We’re working on a True Value for MOT shares which will help us decide how to position it in the portfolio over time.

Disclosure: At the time of this writing Research 2.0 owns shares of Motorola.

Comments

[Roger Knights:]

"Nokia (NOK) who so far appears clueless about what is going on"

But see the current cover story in "Fast Company" magazine, "Nokia Rocks the World: The Phone King's Plan to Redefine Its Business," here:

www.fastcompany.com/ma...

Sep 14 06:20 AM

[Kris Tuttle:]

We all look forward to seeing better offerings from Nokia. We've been waiting or years. Last year, despite looking silly in front vis a vis the Blackberry and the iPhone, management insisted that they were a "global leader" in this space. I think they really believe it.

Sep 14 08:21 AM

[sscutchen:]

"After looking at the first new products from Motorola based on Android, we have officially put them on the list. Motorola is a major global player "

This whole article seems premised on this statement... which is made with no backup whatsoever. What is there in the article to back up this claim? Any product information at all? Just that it uses the Android OS? So I should just take your word for it? Bah. Weak.

Sep 14 08:38 AM

[User 332757:]

You wrote: "At this point few doubt the industry positions of Apple and Research in Motion and those stocks trade at levels with that expectation baked in."

Really? Assuming the iPhone sales for China have been "baked in," what sales numbers and revenue does this include?

I don't think China's been factored in Apple's current price, and I think the one or two deals it makes there will increase their quarterly revenue by billions.

Sep 14 09:21 AM

[mollytjm:]

interesting take on Motorola but i don't think they've used advertising to their advantage. i have an iPhone and i don't see any reason to give that up in anything that's been released so far. And of course Apple innovates very fast and very well. Is that true of Motorola? I had their first flip phone, but they never saw the iPhone type 'phone' coming.
Thanks for the article.

Sep 14 10:21 AM

[Kevin M.:]

Kris, what are you smoking? I mean, that was just hopeless.

Nokia doesn't know what's going on? Motorola is basically offering a N97 with Android. Though the hardware probably isn't that good. N97 is a product that is clearly directed at the exact same audience that the new CLIQ will be. The only difference is that the N97 has sold millions already.

Nokia has had capable devices for years. All the way from the now aged S60 E90 to the current Maemo flagship N900. 5800, N97, E71, E72, X6 and so on just to name a few... N97 is selling faster than the former champion N95. People really like the N97, travel around the world and take notice. Speaking of the N95, it was a HUGE hit a few years ago. It basically defined what smartphones can do. Hardware wise it still beats even the iPhone 3GS on some aspects, and it was released three years ago. 5800 has sold nearly 10 million in, what, ten months?

Nokia's GLOBAL marketshare in smartphones is nearly 50%, AND it went up in the last quarter. They are the leader, they were the leader, they will be the leader.

Motorola doesn't look good at ALL when compared to Nokia. They've got nothing. Android is their only hope, and that's not even their own. Nokia has been providing services, good hardware and software for years now. Ovi is shaping out to be a really good service environment. The Ovi customer base is already huge, tens of millions (around 60 million), and it's getting bigger day by day. Motorola's last big hit was the Razr, and that was just one single phone. Wake up!

It is completely and utterly foolish to whine about Nokia being clueless and then say that Motorola at least knows what they're doing when Motorola is trying to do EXACTLY the same that Nokia has been doing for years.

Seriously, you should take a closer look at what you write about.

Sep 14 11:15 AM

[parthapop:]

I disagree with User 485973. N97 has an awful UI when compared to the other cool trendy touch based smartphones in the market and upcoming. Though Android/Motorola has a lot to overcome to fight one-on-one with iPhones, the platform/the new offering is FAR superior to N97 and I don't see why can't be called cluessless when they have delivered a really top of the line smartphone. I agree that they have sold many of these devices in the Europe but that shows their more of their market penetration and strength there than the true quality of the device.

Sep 14 12:46 PM

[JS Partners:]

If Nokia continue to do badly there is always the chance that they are going to start searching for outside help. What about help from PALM? Could there be some kind of acquisition here?

At $2B market cap it may be the right size. They also have the same person who helped design the i Phone at their helm so this would be an added incentive for Nokia.

Perhaps I am wrong but I always thought this may be the easiest way forward even if their target is marginally overvalued which was pointed out.

Sep 14 12:49 PM

[brewer:]

"Palm is at a major disadvantage with WebOS and Research In Motion may find themselves in a similar state if Android and Apple come to dominate the mobile Internet OS."

Apple already totally dominates. RIM is coasting, but trying to catch up, doing all it can to ape Apple (lke the entire computing 'industry', er monopoly has done for decades) but Apple has the afterburners kicking in, particularly in the iPod/iPhone market.

"Apple, Research in Motion and Palm have all had very nice runs and trade at fairly high multiples."

Apple is horribly UNDERVALUED. None of the deferred revenue OR the China sales OR the compete domination of the laptop market (91% of laptops and desktops costing over $1000 are Apple's) is figured in. Also, no one is making App revenue or media revenue (itunes) besides Apple.

Let's see what happens when Vista 2.0 (marketed stupidly as Windows 7, but hey, they can't call it Vista, which is what it is) collapses again.

Motorola? You have to be kidding me. Are you trying to make up for massive losses? None of these companies stand a chance long term versus Apple.

Sep 14 01:48 PM

[Uncle Miltie:]

Kevin - the phone game is no longer just features, it's usability. Nokia still excels at making great hardware with lots of features, but their user interface is horrible, making it nearly impossible for normal people to use those great hardware features. THAT is what iPhone, WebOS, and Android have been focused on, and that has allowed those handsets to gain significant market share in the smartphone segment. Until Nokia understands and corrects their problems with their UI, they will continue to lose market share. It's that simple...

Sep 14 02:27 PM

[Uncle Miltie:]

Also there is this...

> "It is completely and utterly foolish to whine about Nokia being clueless and then say that Motorola at least knows what they're doing when Motorola is trying to do EXACTLY the same that Nokia has been doing for years"

Try changing the name from Motorola to Palm and going back to January and stating the same thing. Motorola unveiled their new Android platform, and basically everyone who saw it agreed that Moto might have finally "gotten it", similar to the same kind of sentiment with Palm when they unveiled WebOS. That was the driving element of the article and analysis.

Sep 14 02:36 PM

[Yourope:]

"Motorola is a major global player". "Nokia...appears clueless".

I mean, who is clueless? The author of this clueless article.

Sep 14 03:23 PM

[Kevin M.:]

"Until Nokia understands and corrects their problems with their UI, they will continue to lose market share. It's that simple..."

I think the worst for Nokia is already over. The fact that Nokia actually gained some market share in smart phones during the last quarter supports it.

I don't like the comparison between Palm and Motorola. Too different companies, too different strategies. Especially when Motorola is entering the already crowded Android market segment. The CLIQ is almost like a kamikaze attack, Motorola's final big effort. I don't see how Moto could rival the big Koreans.

Sep 14 03:47 PM

[Moon Kil Woong:]

It was sad to watch Motorola loose its marketshare back 20 years ago and it will be equally sad for Nokia if it doesn't advance. Times are changing. Both of their handsets are laughably outdated. The only thing that keeps users using them is the fact it takes time for users to get used to actually using an easier menu system and the fact iPhone and the Prada phone were a bit pricey for most people.

Get with the program! Touchscreens and internet capable are neccesities to stay on the cutting edge of the market not added features.

Sep 15 04:53 AM