Motorola Mobility (NASDAQ:MMI) announced its Q1 FY 2012 earnings on May 1, and the results were a mixed bag. While revenues for the quarter grew marginally over the year-ago quarter to about $3.1 billion, the company couldn’t keep its expenses in check as operating losses almost doubled to $70 million. A seasonal slowdown in mobile device sales following the end of the holiday quarter saw mobile shipments drop to 8.9 million, a decline of 15% versus the previous quarter and 4% year-on-year. However, smartphone sales continued to be strong, growing 25% y-o-y to 5.1 million despite heightened competition from Apple (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android smartphones.
Declining market share
Motorola has struggled in an increasingly competitive mobile phone 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.
High demand for smartphones helped both Apple and Samsung post blowout March quarters, with the latter becoming the largest handset vendor in the world selling more mobile phones than Nokia did last quarter.  Motorola has also seen healthy smartphone sales over the past few quarters despite a slowdown in overall mobile device shipments.
While overall shipments fell due to a seasonal slowdown in sales following the holiday quarter, Motorola’s smartphone sales for the March quarter remained strong. The company sold 5.1 million smartphones during the quarter, a growth of 25% y-o-y and just a tad shy of the previous quarter’s record 5.3 million sales. Following the successful launch of its RAZR MAXX smartphones, the company’s smartphone mix rose to an all-time high of over 57% last quarter, continuing on a trend had been set in Q3 2011.
As a result of the improving smartphone mix, the company’s average selling price of its mobile phones has also been on the rise, as can be seen in the graph below. Motorola’s mobile device ASP rose 8% over the year-ago quarter to about $247, helped by its growing smartphone sales.
With Google’s acquisition of Motorola being held up by regulatory delays due to a pending review by Chinese anti-trust officials, we were expecting an update on the target date for the closing of the deal. Motorola maintained that it expects the acquisition to be completed by the mid-year despite the delay. This should give some respite to concerned investors who were apprehensive of China’s intentions given Google’s rather unsavory previous run-ins with the country. We have already discussed in a previous note why we think such concerns are unwarranted right now. (see Why Investor Concerns on the Googlorola Deal Falling Apart Are Premature)Notes:
- Samsung tops Apple in smartphones, blows past Nokia to end 14-year run at No.1 in mobile, BGR.com, April 27th, 2012 [↩]