Motorola in danger of losing spot as second-largest maker of cellphones

Motorola Inc. may be poised to lose its status as the world’s No. 2 cellphone maker, ceding the spot to rival Samsung Electronics Co., analysts said Monday.

A series of miscues in its handset division has sent Motorola’s market share tumbling to 15.3 per cent in the second quarter, down from a high of 22 per cent last year, according to forecasts published Monday by CIBC World Markets analyst Ittai Kidron.

Meanwhile, South Korea-based Samsung, which has seen its market share climb to 14.5 per cent, is a close third.

The decline comes about a year after experts thought Motorola was on a path to surpass Finnish rival Nokia Corp. for a spot as the world’s top cellphone company.

“They were getting close to Nokia and they’ve really fallen off that pace,” said Neil Strother, a Seattle-based wireless analyst for Jupiter Research. “That’s as big a disappointment as potentially losing the No. 2 position.”

Motorola’s stumbles have helped boost Nokia’s market share to 37.4 per cent in the second quarter, according to CIBC’s projections.

Strother said he doesn’t think Samsung will unseat Motorola within the next year.

“Unless they really stub their toe, I don’t see them slipping out of No. 2 any time soon,” he said.

During the first quarter, Motorola said its market share had fallen to 17.5 per cent, while Nokia said its was 36 per cent. According to data from research firm Gartner Inc., Samsung accounted for 12.5 per cent of the market in the first-quarter.

Schaumburg-based Motorola’s fortunes have sagged since the fall, when it tried to boost market share by aggressively cutting prices on Razrs and other high-end phones, especially in emerging markets. Profits dropped steeply and the company this spring posted its first quarterly loss since 2004. In the meantime, the company lost a third of its stock market value in just half a year.

Chief executive Ed Zander said Motorola would shift its focus to higher profits instead of growing its share of the market. But executives have warned the company’s lacklustre performance would continue through the second quarter and analysts have been skeptical about the company’s promise to improve results in the second half of the year. J.P. Morgan analyst Ehud Gelblum cut his estimates for Motorola’s handset shipments by about 10 per cent for the remainder of the year on Monday. He also lowered his second-quarter revenue estimate by five per cent.

“Our retail sales checks suggest that demand for (Motorola’s) higher-end phones is also tepid and not likely to offset weak sales of low-end phones despite continued price reductions,” he said in a note published Monday.

Company spokeswoman Juli Burda declined to comment.

Motorola hopes a new cellphone lineup, anchored by the Razr 2, along with a restructuring plan will help propel it back into its status as an industry darling.

Motorola shares on Monday fell eight cents to $17.81.

On the Net: www.motorola.com