Motorola may lose U.S. phone lead, researchers say

Motorola Inc. may lose its No. 1 spot in U.S. mobile-phone sales this year as consumers abandon its handsets for more-advanced models, research firms IDC and Strategy Analytics said.

Motorola's share of the U.S. market fell to 25 percent in the first quarter, according to data from IDC. South Korea's LG Electronics Co. and Samsung Electronics Co. each expanded their share to 21 percent, while Apple Inc. gained on sales of its iPhone, IDC analyst Ramon Llamas said.

At this pace, the company that created the mobile-phone market 25 years ago and maker of the Razr handset will cede the top spot in the U.S., the only region it leads, before the end of 2008, Llamas said. Buyers in Europe and Asia already have switched to LG touch-screen phones and Nokia Oyj devices offering satellite navigation, leading to a 33 percent slump in Motorola's worldwide phone sales last year.

"The U.S., their bread and butter, is not immune anymore to their problems," Llamas said in a phone interview from IDC's headquarters in Framingham, Mass. "Samsung and LG have come out swinging with great products and received a very good reception from most U.S. carriers."

In the first quarter of last year, Motorola had 37.7 percent of the U.S. market, while Samsung had 16.6 percent and LG had 16.3 percent, Neil Mawston, an analyst at Boston-based researcher Strategy Analytics, said in a phone interview. He said Motorola will probably lose its U.S. lead in the second half of 2008.

Pressure to Split

Under pressure from billionaire investor Carl Icahn, Motorola Chief Executive Officer Greg Brown said in March that the company will split off the money-losing phone unit to focus on profitable television set-top boxes, two-way radios and wireless-networking equipment. The phone business has lost more than $1.5 billion since the start of 2007.

Motorola slipped 3 cents to $9.87 at 9:33 a.m. in New York Stock Exchange composite trading. The shares had dropped 38 percent this year before today, compared with a 6 percent drop in the Standard & Poor's Information Technology Index.

Motorola plans to introduce more products in the second half, followed by phones with improved features next year, spokeswoman Jennifer Erickson said in an e-mail. She declined to comment on what the Schaumburg, Illinois-based company expects will happen to its U.S. market share.

American consumers were slower to buy video and Web phones than users abroad because U.S. carriers often subsidized the more basic devices or even made them free with some contracts. Then the multimedia iPhone came along in June and convinced U.S. consumers a phone is worth paying for. The iPhone costs as much as $499 with a two-year contract. Motorola's Razr 2, which plays music and has a camera, costs $199 with a two-year contract after rebates, according to AT&T's Web site.

`Times Changed'

"Times changed in the U.S., and people now expect the phone to be more than a phone," Llamas said. "Motorola did not get on that boat."

Samsung lifted sales with the BlackJack, which has a full keyboard and runs Microsoft Corp.'s Windows software, and the Sync camera phone. LG has benefited from demand for the touch- screen Vu and Voyager handsets.

The U.S. losses suggest that AT&T and Verizon Wireless, the country's biggest mobile-phone companies, are looking elsewhere to meet growing consumer demand for phones that play video and surf the Web, Llamas said.

Verizon Wireless chooses phones based on customer demand, Brenda Raney, a spokeswoman for the second-biggest U.S. mobile carrier, said in an e-mail. Motorola is a "valued supplier" for market leader AT&T, spokesman William Marks said in an e-mail. Both declined to say whether their companies are relying less on Motorola products.

BlackBerry, Nokia

Research In Motion Ltd., maker of the BlackBerry e-mail phone, was fourth in the U.S. in the first quarter, while Espoo, Finland-based Nokia, the global leader, was fifth, according to IDC. Each had less than 10 percent of the U.S. market.

The iPhone still ranked outside the top five, Llamas said. Apple sold about 4 million phones last year, and CEO Steve Jobs has said he plans to sell 10 million in 2008 to capture about 1 percent of the global mobile-phone market.

Motorola's global phone shipments plunged 40 percent last quarter as its Razr 2 and Z8 lost customers. In April, Brown, 47, began selling the Z9, which features satellite navigation. The company also started shipping the Rokr E8, which holds about 5,000 songs and includes a camera.

The company said last month that North America was the region where its market share declined the most in the first quarter. Customer losses at Sprint Nextel Corp.'s Nextel unit also have hurt the company. Motorola is the largest provider of handsets for Nextel, which lost about 25 percent of its subscribers last year.

Motorola's global market share fell by half to 9.7 percent in the past 12 months, while LG, Samsung and Nokia all gained, Strategy Analytics said last month. Seoul-based LG may surpass Motorola to become the world's No. 3 mobile-phone maker this year. Motorola lost the No. 2 spot last year to Suwon-based Samsung.