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In its fourth quarter 2009 earnings, Motorola (MOT) indicated that its market share in the digital TV box market declined faster than we had expected. Motorola’s decline in the digital TV box market can be attributed to continued stagnation of the US housing market which drives part of the demand for new TV boxes and also impacts Motorola’s chief competitor Cisco (CSCO).

Motorola’s digital TV box customers include cable operators like Comcast (CMCSA) and Time Warner Cable (TWC) that purchase the boxes to provide to their cable subscribers. New homes and the relocation of customers help to drive demand for the latest generation of TV boxes.

We estimate that the digital TV boxes business accounts for about 13% of the $7.19 Trefis price estimate for Motorola’s stock. In comparison, Cisco’s digital TV box business constitutes less than 7% of our estimate for Cisco’s stock.

We expect Motorola’s market share to decline further despite the company’s efforts to diversify its product offering with IPTV boxes.

Motorola’s Declining Digital TV Market Share

We estimate that Motorola’s digital TV box market share decreased to about 11%, lower than our estimate for over 12%. We now expect Motorola’s market share in digital TV boxes to decline to about 10% by the end of our forecast period, down from our earlier estimate of 12%.

In addition to suffering from the slow housing market, Motorola and other digital TV box providers are under a long-term threat from Open Cable technology. TV makers like Sony (SNE), Panasonic (PC) and Samsung (OTC:SSNLF) are expected to incorporate Open Cable technology that will directly integrate set-top box technology into TVs, making the digital TV boxes offered by companies like Motorola and Cisco obsolete.

IPTV is the Future

Motorola is taking the initiative to move from offering traditional digital TV boxes that decode digital cable or satellite signals to IPTV boxes that deliver video content over the internet. For example:

  • In November 2009, Motorola acquired BitBand, a leading provider of content management and delivery systems specializing in video-on-demand for IPTV
  • In January 2010, it acquired SecureMedia, a company that specializes in digital rights management for IP video networks

You can modify our forecast for Motorola’s digital TV boxes market share above to see the significance of its impact on Motorola’s stock.

For additional analysis and forecasts, here is our complete model for Motorola’s stock.

Disclosure: No positions

Source: Housing and Motorola's Stock Price