Motorola Mobility (NASDAQ:MMI) is expected to announce its Q1 FY 2012 earnings on May 1. Having reported lower-than- expected results last quarter, we will watch for the impact of high competition from Apple (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android smartphones on Motorola’s smartphone sales. Both Apple and Samsung announced blowout Q1 results despite a seasonal slowdown in smartphone sales post a record holiday quarter, so it is likely that they have fed on Motorola’s market share. We are also expecting an update on the target date for Google’s acquisition of Motorola, which is being delayed due to the pending review by Chinese anti-trust officials.
Declining Market Share
Motorola has struggled in an increasingly competitive smartphone market as Apple’s iPhone and Samsung’s Android-based smartphones continue to dominate sales around the world. Its global mobile phone market share has declined from about 14% in 2007 to just over 2% in 2011. Meanwhile, Apple and Samsung have raced ahead to the top of the smartphone market, riding on the surging demand for smartphones.
Last quarter, we expected Motorola to benefit from the holiday demand and post a decent quarter. However, the iPhone 4S’ record launch as well as a strong showing by Samsung’s Galaxy series saw Motorola’s mobile phone shipments fall 9% quarter-on-quarter and 8% year-on-year. Even with the holiday season behind, Apple and Samsung posted blowout March-ending quarters, despite a seasonal slowdown in mobile phone sales.
Banking on the huge demand for smartphones, Samsung catapulted as the largest handset vendor in the world selling more mobile phones than Nokia last quarter. 
With Samsung and Apple ruling the smartphone roost, it is becoming increasingly tough for struggling rivals such as Motorola, Nokia and RIM to compete. Since the seasonal slowdown in smartphone sales seems to have not affected Apple and Samsung much, we believe their market share gains have come at the expense of other struggling incumbents. Nokia saw its Q1 handset sales drop a huge 24% over the year-ago quarter. Motorola’s results could show similar market share losses, albeit of a lesser degree.
We are looking forward to an update from Motorola on its pending acquisition by Google. While the acquisition has been signed off by both the U.S. and European regulatory bodies, China has prolonged its anti-trust review of the deal.
Google’s previous run-ins with China have been rather unsavory with the company having to shut down its operations two years ago over the latter’s stringent censorship norms. This has therefore added to investor concerns that China may once again prove to be a significant roadblock by delaying or even refusing to give its clearance for the deal, forcing Google to abandon its $12.5 billion bid altogether. (see Why Investor Concerns on the Googlorola Deal Falling Apart Are Premature) While we do not think any of these concerns are legitimate on current standing, an update on the expected date of the deal’s closing would discard all such concerns.Notes:
- Samsung tops Apple in smartphones, blows past Nokia to end 14-year run at No.1 in mobile, BGR.com, April 27th, 2012 [↩]