Market Share Declines Could Hurt Motorola

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Motorola (MOT) recently indicated in its quarterly earnings that its market shares in the mobile phone segment declined faster than we expected.

Mobile phones: The most valuable division for Motorola

Motorola’s mobile phone business constitutes 32% of the $7 Trefis price estimate for Motorola’s stock. Smartphones, like the Droid and Cliq, are increasingly crucial for Motorola’s mobile phone business.

The company faces tough competition in the smartphone space from big players like Research in Motion (RIMM) (BlackBerry), Apple (NASDAQ:AAPL) (iPhone) and Nokia (NYSE:NOK) (N-Series). Motorola was a late entrant into the smartphone market and its products have lacked the appeal of marquee products like the iPhone and BlackBerry.

Mobile phones market share declines to 2%

Motorola’s market share in mobile phones declined more than we expected in 2009. The company sold 55 million mobile phones of which only 2 million were smartphones despite significant marketing efforts taken by the company to promote the Droid and Cliq.

The outlook for Motorola’s mobile phones business remains grim despite the company’s plan to launch 20 new smartphones and to sell 11-14 million smartphones in 2010. We estimate Motorola’s market share will decline from 4.5% in 2009 to 2.4% by the end of Trefis forecast period. You can modify our forecast for Motorola’s mobile phone market share to see how Motorola’s stock is impacted by fluctuations in its share.

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

Disclosure: No positions

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