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Can Motorola's Big Bet on Android Pay Off?

A few days ago Business Week reported that Motorola (s MOT) was working on a new social networking-oriented, Google Android-powered smartphone. Later we pointed out that Motorola’s experiment with Android goes beyond just one phone. Today, The Wall Street Journal reports that Motorola’s bet on Android is much bigger than previously reported.

As we said earlier, the Motorola handset division’s new chief, Dr. Sanjay Jha, had been a big proponent of Google’s (s GOOG) Android when he worked for Qualcomm (s QCOM). The Journal report says that his affection for Android is undiminished. He is likely to announce some draconian changes that will see the company double down on Android.

Motorola will cut the number of operating systems it uses to three — Windows Mobile for the high-end phones, Android for mid-tier (very high volume) phones and Motorola’s proprietary P2K OS. Apparently the company was using six different operating systems in its phones — no surprise they were such a mess. Jha is planning large scale job cuts at Motorola’s handset business, and he is also overhauling the manufacturing and supply chain operations of the beleaguered handset maker. The question is, will these steps work?

The current downturn is crimping demand for handsets and impacting every handset maker in the business. It is a downturn that is going to be equally hard for Motorola, since it doesn’t have any hit phones for this holiday season, which means it will keep ceding market share to the likes of Apple (s APPL), RIM (s RIMM) and of course, Nokia (s NOK), which recently started cranking out CDMA phones.

RBC Capital Markets analyst Mark Sue recently pointed out that carriers are looking to subsidize smartphones, offering them for about $99. This puts pressure on feature phones — the kind Motorola sells. He recently cut his estimated sales for 2008 by 2 million handsets, topping out at 31 million. He is hopeful that some new devices next year will get the company back on track.

That is assuming that the world economy makes a recovery and consumer spending increases. Furthermore, the company is not likely to have its first Android phone on the market for a few quarters — which would give its opponents enough time to press their advantage. The way I see it, Jha’s effort to restore Motorola’s handset business is as difficult is climbing Mount Everest without a tank of oxygen. Still he has to try. If he succeeds, he gets about $100 million over three years and 3 percent of the independent handset business. If he fails — he walks away with about $30 million.

22 Responses to “Can Motorola's Big Bet on Android Pay Off?”

  1. Joe The Shareholder

    Jha is sharp. He convinced the desperate, gullible, and incompetent Motorola board of directors to guarantee him a multi million dollar paycheck, even he if can’t fix Motorola Devices. He walks off with $30 million in October 2010…no questions asked. The Jha compensation deal is another example of failed American corporate governance that is ruining great American corporations. The Motorola board has presided over a string of incompetent CEOs and executives. The last Motorola CEO who knew what he was doing was George Fisher. Since Fisher, there has been a string of incompetent executives. Tooker – dull, uninspiring and a stopgap to groom the anointed prince; Chris Galvin – the tragic prince thrust into a job for which he was not cut out to do; Ed Zander -the carpet bagger; Brown – the computer illiterate; and now Jha – a $30 million no worries paycheck guy. What makes it so tragic is that Motorola operates in an industry they helped invent – mobile telephones; an industry that has grown at phenomenal rates for the past twenty years and created billions and billions of profits. Every Motorola board director should resign.

  2. Capt Ahab

    Motorola Android phones late 2009? Too little, too late. Jha may not be the right guy to fix Motorola Devices. Jha comes from within the device. He is a chipset guy; an operating guy; an engineer. Success in mobile devices requires a rare blend of understanding leading technology, consumer marketing, and production efficiency. The ingredients are what makes iPhone successful and Blackberry too. Steve Jobs has proven many times how to blend technology and marketing and make hits…Mac, iPod, iPhone. Jha has no experience in marketing.

  3. Either it’s Jha or Ojha, the direction is still wrong. Here, Jha is also not planing to do any thing new than his ancestors. His mantra is also to “Follow!!!!”. It is sad to see a leader like Motorola becoming failure due to its mediocre business managers who don’t have any idea of Tech market.

  4. Motorola is so screwed….relying on an unproven OS. They think a “social networking phone” is going save them? What Fortune 500 executive clamor for it? People in their 20’s all buy Apple…they dont want a Motorola.

    The best part is that they agreed to pay CEO Sanjay Jha $30M even if he fails.

    For more coverage on f*cked companies:

  5. I fail to see how Mortorola has a saving grace in Android. The hype around Android is troublesome as most people dont seem to understand the realities of Android and hear the words open source and think its the greatest thing since sliced bread.

    Is building a social framework around Android going to save the day for Mortorola? So instead of competing on handset functionality and design they are now going to be competing with Apps and all the social players out there.

  6. What’s a little surprising to me is what Motorola will do with the upcoming Symbian. They’re a founding member of the Symbian Foundation, and their execs have been touting it at recent tradeshows. Those could have been before Jha though …