Motorola Hitches Its Wagon to a Star

I came to know this phrase when reading about the rise of the railroad industry in the US. It certainly represented a golden era of opportunity for those that figured out how to exploit it.

As we noted in our last Weekly Wrap, Android adoption is the top story in the mobile Internet space. We brought Motorola (MOT) into the fold as a mobile Internet play back on September 13th. Google (GOOG) is smart enough to see that the major growth opportunity for them is in the mobile Internet space. They have the products and resources to be not only successful but one of the two or three long-term leaders in this market segment. (Has Nokia (NOK) management spent too much time in the hot tub to understand this?)

Motorola made some painful choices to abandon some platforms and focus on Android. Although most think of Motorola as a hardware manufacturer, they have very strong software development skills. Another reason the Razor was so successful is that the software worked well and was far more intuitive than what was found on other handsets. The key to making Android successful is the customization layer that will ensure that the user experience will be seamless and flowing. Google has much to gain from the close working relationship with Motorola. Delightful consumer experience on a smart phone is no easy trick.

Of course the speculation on whether Android will be an “iPhone killer” and all that has become active in the press and even among some analysts. However it’s not a discussion worth having. There will be different market segments in the mobile Internet and they may diverge much more before consolidating. Some of us already carry a laptop/netbook, smart phone, GPS, and digital camera. [We won't get started on eBook readers which make no sense to us.]

At first there is a fairly obvious set of potential customers for these phones. The iPhone is the best example of a consumer device that combines communication with some entertainment and web browsing. The “enterprise” segment is still dominated by Research in Motion (RIMM) although their platform feels a little old and dated these days. The Android phones will appeal to the open, Google-oriented crowd which is a considerable number. With help from Motorola and service providers like Verizon (VZ), the Android phones will be in a position to eat into the general consumer space and participate in the enterprise market with some improved features.

One wildcard that has yet to be seen is if Microsoft (MSFT) can make a last minute save of their Windows Mobile OS with a new release in 2010. Today it is close to being out of the game. If Microsoft fails with Windows 7 Moble, Android will likely pick up some more points of share. If Windows 7 Mobile is a success, it’s not clear how much momentum Microsoft will be able to get unless companies like Nokia decide it’s their last good chance to get back in the game. Last, there is Palm (PALM), which has had some bad luck here due to the arrival of Android. Palm correctly identified and has exploited an opening left in the market by Apple for a more open, keyboard-sporting, multi-tasking device. Android fills that gap and has enough weight behind it to eclipse the valiant and noble efforts of the Palm team. There are certainly some companies that might be interested in acquiring Palm if they decide to give up fighting with limited resources.

Many have suffered by prematurely declaring the end of Research in Motion, but we have serious concerns about how long they will be able to hold out versus Google in this space. The Droid gives a glimpse of how Google plans to exploit their existing position to be successful in the mobile market. Enhanced Google Maps, and local information is going to help imbue Android phones with much more ambient intelligence and usefulness and that’s just the beginning. Their solid position as an enterprise device and as the reigning king of mobile email use case gives RIM time to address these long-term strategic issues. However they are not going to be successful by just staying on their current path and working harder and faster.

Last but not least, the question of Skype comes up. Google has not been very successful with their IM or communication platforms so far. Their acquisition of Grand Central finally became Google Voice recently but it seems quite limited for now. To be fair Google has not done very well on the user interface level for some time. Google Maps was certainly a great success but newer products like Gmail and Apps are only so-so. Google hopes to address this with Wave. Wave is promising but clearly suffers a bit from an engineer doing design work. We are in the early stages of testing so will let the jury stay out for now. Skype has done well in the past few years but has yet to get lots of traction in mobile. Android will give them another chance to lure users into the Google communication platform.

When it comes to the mobile Internet the time is now and it argues for more bold strokes being made by anyone who wants to be a major player.

Disclosure: The Research 2.0 model portfolio has a long position in Motorola.

Comments

[jockum:]

spot on. nokia is in old territory when it is pushing its Navteq. Google maps is everywhere, and the launch of the google map for mobiles, is a killer. Motorola is doing completely right when hooking up with google.

Oct 30 08:54 AM

[JamesApple:]

Android is the clear choice for enterprises over Rim. Enterprises need customizations, no two enterprises are the same, even within an enterprise there are often very different needs from different business units in order to meet diverse business requirements. Rim cannot customize, Rim is one chunk of uncordinated horde of incompatible hardware hodgepodge loosely held together by BES that do nothing more than very crude and simple email and rudimentary messaging, blackberrys are just toys that cannot even perform workflow tasks, Microsoft SharePoint does, what's the point for enterprises to carry two or more infrastructures with Rim increasingly becoming more of a nuisance than help? Email and messaging can hardly be called business or executive functions, whereas workflow is the heart of business processes. Doing business based on Rim email and messaging is totally unthinkably wrong but yet that's exactly what top executives had been doing leading to the global collapsing of economic and financial meltdowns, but these blackberry wielding fiends would never ever admit using blackberrys instead of robust business practises in conducting their work and duties. Businesses are highly complex, blackberrys should have no place in conducting decision making and business communications. Android should be deployed to fill the huge voids being grossly unadequately mangled by the Rim blackberrys, and deploy Android immediately.

Oct 30 11:53 AM

[Troy Jensen:]

Very well-thought out, insightful posting, I am tweeting this out to my follwers now! I wish I had a point to debate, but you have done your due-dilligence and research, my friend. Thank you for the fine article.

Oct 30 01:55 PM

[Wireless Wiz:]

What a load of crap to blame the financial crisis on RIM, or any single technology company. You saying that if every Wall Street exec used an iphone the outcome would have been different? Of course not. The crisis was driven by greed and excess leverage, not by using one's Blackberry to send an email. What a joke. James, you really show yourself to be uninformed if you believe this garbage. It's just more of the same hatred towards RIM, nothing fundamentally sound and rational. I'd venture to bet at least 80-90% of your posts here are geared to hating RIM - we get it already - get over it.


On Oct 30 11:53 AM JamesApple wrote:

> Android is the clear choice for enterprises over Rim. Enterprises
> need customizations, no two enterprises are the same, even within
> an enterprise there are often very different needs from different
> business units in order to meet diverse business requirements. Rim
> cannot customize, Rim is one chunk of uncordinated horde of incompatible
> hardware hodgepodge loosely held together by BES that do nothing
> more than very crude and simple email and rudimentary messaging,
> blackberrys are just toys that cannot even perform workflow tasks,
> Microsoft SharePoint does, what's the point for enterprises to carry
> two or more infrastructures with Rim increasingly becoming more of
> a nuisance than help? Email and messaging can hardly be called business
> or executive functions, whereas workflow is the heart of business
> processes. Doing business based on Rim email and messaging is totally
> unthinkably wrong but yet that's exactly what top executives had
> been doing leading to the global collapsing of economic and financial
> meltdowns, but these blackberry wielding fiends would never ever
> admit using blackberrys instead of robust business practises in conducting
> their work and duties. Businesses are highly complex, blackberrys
> should have no place in conducting decision making and business communications.
> Android should be deployed to fill the huge voids being grossly unadequately
> mangled by the Rim blackberrys, and deploy Android immediately.

Oct 30 05:10 PM

[Carousel:]

"Gmail and Apps are only so-so" .. does the writer even know what he

Oct 30 05:35 PM