Analyst on Motorola: ‘Half-baked mess’: CEO candidate withdraws, according to Journal

Analyst Tero Kuittinen at Global Crown Capital L.L.C. said in a note to investors that top-tier carriers in the United States were pulling back on support for Motorola Inc., and characterized the vendor’s pending product launches as “a half-baked mess.”
“The summer surge of fresh (handset) models (from competitors) featuring sophisticated new display technology will hit Motorola particularly hard,” Kuittinen wrote. “Motorola missed the key year 2007 product waves of 5-megapixel camera phones and touchscreens completely. Motorola has also been notably slow to incorporate GPS, Wi-Fi and HSDPA support in ‘at least two of three’ combinations that are becoming a high-end staple in 2008.”
“The recent leaks of Motorola’s summer and fall model launches combined with the new announcements from HTC, Samsung and LG lead us to believe that Motorola is going to under-perform the already dismally low expectations for the second half of 2008,” Kuittinen added. “Our discussions with operator sources including AT&T, Verizon, Orange, Vodafone and T-Mobile indicate profound lack of confidence in Motorola’s upcoming model range.”
Moto’s eroding market share in the United States is of particular concern, Kuittinen said. In Europe, Motorola’s market share has shrunk to less than 5%, but the company still holds about 25% share in the U.S., critical to its survival, the analyst said.
Last year, operators appeared to support Motorola with handset promotions, out of concern they would become too dependent on Nokia Corp. in Europe and on Samsung Electronics Co. Ltd. and LG Electronics Co. Ltd. in the United States, the analyst said. But with Apple Inc., HTC Corp. and Research In Motion Ltd., offering an array of high-end devices, that concern – and support for Motorola – has declined, according to Kuittinen.
The iPhone’s new pricing also will have an impact on Motorola, as it will force carriers to “wage market-share war” by cutting prices on many high-end smartphones and feature phones.
“The three-way battle between Apple, LG and Samsung unfolding across AT&T, Verizon and Sprint could well have a devastating impact on Motorola in the third quarter,” Kuittinen wrote. “As the new wave of large-screen models is set to arrive at fascinatingly low, subsidized prices, (Motorola) is exposed to margin pressure that may be even stronger than most of the company’s detractors realize.”
Kuittinen’s views came on the heels of a report that Motorola’s plan to split into two, independently traded companies may founder on financial grounds and at least one rumored candidate to lead the handset division has balked.
The Wall Street Journal reported that the breakup could cost as much as $750 million and an independent handset division would require about $4 billion to sustain itself for two years, leaving the company’s remaining businesses holding the majority of existing debt and a similar amount of cash.
The resulting companies’ credit ratings likely would be downgraded to “junk” status, making it more expensive to raise funds, the paper said.
That scenario – or a look under the hood at handset products in development – may have scared off Todd Bradley, a Hewlett-Packard Co. executive and, reportedly, a candidate for CEO of Motorola’s handset division. Bradley said earlier this month that he had no plans to leave his post for Motorola.
Motorola declined to comment on the WSJ story or on Kuittinen’s analysis.