Neutral on Motorola Mobility - Analyst Blog

We initiate coverage for Motorola Mobility Holdings Inc. (MMI) with a Neutral recommendation, which means the stock will perform mostly in line with the broader market. The company is finally reaping the benefit of the decisions it took for its struggling mobile phone businesses.

Supported by strong market traction of its 3G Android-based smartphones, Motorola Mobility is gradually regaining lost ground in the lucrative U.S. smartphone market.

In the recently concluded Internal Consumer Electronics Show, Motorola Mobility unveiled 4 very powerful wireless gadgets. During mid-2011, Motorola Mobility will launch its first 4G smartphone DROID BIONIC mobile phone with Verizon Wireless (VZ).

At present, Verizon is gradually implementing its nationwide 4G LTE network. DROID BIONIC will also become the first 4G handset offer by Verizon for its super fast LTE network.

During the first quarter of 2011, Motorola Mobility will launch ATRIX smartphone for AT&T (T). This will be the company's first offering with AT&T. Management hinted that 4G LTE enabled ATRIX will also be ready by the time AT&T starts deploying its LTE network.

Motorola Mobility is expected to launch its first tablet called “XOOM” by mid-February 2011. XOOM will be the first device to run on Android 3.0 Honeycomb operating system, specifically designed by Google Inc. (GOOG) for tablets. XOOM can be later upgraded to 4G LTE network.

We believe Motorola Mobility will get tremendous carrier patronage and marketing boost from the two largest wireless operators in the U.S., viz, Verizon Wireless and AT&T in 2011.

While we expect Verizon to significantly promote DROID BIONIC for its newly launched LTE networks, AT&T is expected to provide huge support to Motorola Mobility after Apple Inc. (AAPL) launched its legendary CDMA iPhone 4 with rival Verizon.

Nevertheless, a major near-term concern for Motorola Mobility is Apple's decision to start selling its iconic iPhone 4 with Verizon Wireless. So far, Verizon was the largest carrier partner of Motorola Mobility. Huge marketing promotion and subsidy were the primary reasons for the grand success of Motorola Mobility's DROID series of 3G smartphones.

Since Verizon has shifted to Apple's iPhone we believe Motorola Mobility may not get the kind of carrier promotion from Verizon it got earlier. It remains to be seen how efficiently Motorola Mobility addresses this challenge.

 
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