Motorola searches for success with Google software

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For Motorola Inc., the technology giant that introduced the world’s first commercial cellular phone in 1984, the last few years have been a disaster.

The company’s mobile phone sales and market share have plummeted, profits have turned to losses, layoffs have mounted and a plan to divide itself in half is indefinitely postponed. Motorola has retreated to the sidelines of the global business it pioneered and once dominated, eclipsed by groundbreaking phones from competitors such as Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry.

On Thursday, Schaumburg, Ill.,-based Motorola tries again to prove its prowess and recapture the attention of consumers. At an industry event in San Francisco, Motorola will unveil the first phone in a lineup that represents the future: handsets using software from Google.

The announcement will mark the public debut of a strategy designed to propel Motorola back into the handset game and represents the first fruits of co-Chief Executive Sanjay Jha, who was hired away from Qualcomm Inc. last year to lead the mobile devices business out of the wilderness.

“These new phones (Jha) launches absolutely have to be ‘wow,’ because we’re coming into the holiday season,” said Jim Suva, an analyst at Citigroup. “It’s the first glimpse of, ‘Is Motorola back or not?'”

Motorola has shown signs of life in recent months. The handset unit continues to lose money, but the company eked out a small profit in the second quarter. And Motorola’s stock has risen about 70 percent this year, reflecting anticipation of Jha’s strategy.

But Motorola’s comeback faces formidable challenges. Its recent history of missed holiday seasons and underwhelming devices weighs heavily on the company, complicating its efforts to convince wireless carriers to promote its phones. And Jha is making a huge bet on Google’s Android platform, which is open to all manufacturers.

This means Motorola will be launching its new portfolio at the same time other heavyweights will be introducing their Android phones. The competition already has started in the last month, with T-Mobile and Sprint announcing new Android devices from Taiwanese maker HTC Corp.

Jha is taking a careful approach to the expectations game, trying to generate excitement for the new device while dispelling the notion that the company’s fate rests solely with the success of the holiday season. Motorola plans to have two Android phones available this year.

“It is an important launch, but I think it is possible to overstate the importance of it,” Jha said in an interview. “We’re not anymore in a phase where one product will either make or break this company. What we’re trying to do is build a portfolio of products.”

Jha said Motorola has tens of smart phones lined up for next year, putting the company into a fast-growing and lucrative segment of the handset industry. Smart phones are sophisticated devices designed for data-intensive functions like e-mail and Web browsing. Second-quarter data from Gartner Inc. show that worldwide smart phone sales jumped 27 percent compared with a year ago, while overall mobile phone sales fell 6.1 percent in the same period.

Aside from the Q, a business-focused phone that was first introduced in 2006, Motorola has been absent from the smart phone trend. Jha believes that Android is flexible and will allow Motorola to produce smart phones for a variety of tiers as the devices make their way from the high end into the mainstream.

And although other manufacturers’ phones will be running on the same system, Jha said Motorola’s Android devices will stand out.

“We have to differentiate by addressing the needs of a particular segment extremely well,” he said. “You’ll see us launch devices that address … five to six segments, and address them with precision in such a way that folks who have those needs will say, ‘How did I live without this solution?’ “

Android’s success is a key pillar in Motorola’s turnaround strategy.

To that end, Motorola is fostering growth of the developer community, hoping that independent software developers will flock to Android in the same way they’ve created tens of thousands of applications for the iPhone. The ability to personalize a phone with applications is an important draw for consumers as they use their mobile devices for Web-based activities such as social networking and streaming video.

But because Android is an open platform, Motorola is drawing from the same pool of developers who also want to get their applications onto HTC or Samsung phones.

“It’s a dual challenge,” said Gerry Purdy, chief analyst for mobile and wireless at Frost & Sullivan, a research firm. “You want to help the community so everybody will build applications, and you want to keep some of that proprietary ability that will help you sell in the marketplace.”

Motorola has provided extra incentives to gain developers’ loyalties. In late July, Motorola announced new programs for Android developers, including one that gives selected developers access to coming phones for testing and promotes their applications when the handsets become available.

While some developers are indifferent to manufacturers because they want their application on as many phones as possible, others may be willing to sign exclusive deals that give their work greater visibility and integration with a device.

“What (Motorola is) doing is trying to provide tools for free to developers, so those developers will be more inclined to focus on Motorola,” said Jason Shah, the developer behind the Android application for Mediafly Inc., a Chicago company that aggregates podcasts and makes them available on Web-connected devices. Mediafly was accepted to Motorola’s special developer program last week.

“It’s a fairly recent idea (for Motorola) to really push a community development model,” said Shah, noting that the company has been reaching out to developers nationwide through meet-ups and online groups. “Historically, they’ve been trying to support six or seven operating systems. Finally, they have a vision of where they want to go and can dedicate the resources.”

The Android platform currently offers far fewer applications than Apple’s. Jha said that although he does want a lot of developers working on Android, the competition is more than a numbers game.

“What you find at the moment is a lot of people download applications and they never go back to them,” he said. “What we’re trying to do is make sure the quality of applications is better, they’re deeply integrated, and the discoverability of the applications is better.”

When it comes to wooing both consumers and software developers, it’s still about the phone.

“What we need in the short term are really compelling handsets to draw people in,” Shah said.

Delivering a game-changing handset is where Motorola has stumbled in the last two years. The company wowed the world with the Razr, but it failed to produce successors to the best-selling phone and was quickly walloped by competitors.

Motorola needs the holiday season to set a strong tone for its 2010 lineup, which represents the full range of what Jha’s team has been laboring over for the last year. Given the constraints of the product-development cycle, Motorola is wedded to its Android strategy well into 2010.

“It takes so long to get all the development done that we probably fixed our road map three to six months ago, so we can deliver on time,” Jha said.

“But with what happens in the fourth quarter, what features do well … the feedback we get from that will allow us to fine-tune our experiences.”

(c) 2009, Chicago Tribune. Source: McClatchy-Tribune Information Services.