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Motorola Results Point to Apple, Samsung Dominance

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Motorola pre-announced lousy fourth-quarter results Friday afternoon, indicating market-share losses to Apple and Samsung.

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For some reason, Friday afternoon after the market close is considered a good time to deliver bad news to Wall Street, since by that time, most traders and market participants will have gone home.

Maybe it allows folks to put off stink-eye from the media for another weekend?

Who knows?

But last Friday, at 4:50 p.m. EST, Motorola Mobility (MMI) issued a "Business Update," which as I'm sure you can guess, meant bad news.

Truth be told, Motorola's investor-relations team didn't hit the low point reached by Barnes & Noble (BKS) last Thursday (see: Barnes & Noble: Nook Sales Are Great, But They're Killing Us!).

But that doesn't change the fact that Motorola is having a tough time beating back the intense competition in smartphones.

Before we go further, let's remember that Motorola is in the process of being acquired by Google (GOOG) for $40 a share, which is keeping the share price up.

So let's see what's going on.

Motorola now expects fourth-quarter sales of $3.4 billion, with "modest profitability on a non-GAAP basis." This most certainly does not compare well with consensus estimates calling for earnings of $0.41 per share on $3.88 billion in sales.

Furthermore, Motorola now expects mobile-device unit sales of 10.5 million, of which 5.3 million were smartphones. This implies that Motorola's total device sales fell by 7.1%, while smartphone sales rose by 8.2%.

The cause? Motorola is being hit by "increased competitive environment in the Mobile Device business," as well as "higher legal costs associated with ongoing Intellectual Property litigations."

So what's the big takeaway here?

First off, anyone still holding onto Motorola in the hopes of squeezing out another $1.80 per share from Google is absolutely insane.

It's simple -- Samsung and Apple (AAPL) are decapitating the competition.

The level of competition in the Google Android smartphone market is crazy, though Samsung is really breaking away as the leader, having reported a record quarterly profit on Friday on the back of strong smartphone sales. Samsung also dethroned Nokia (NOK) as the number-one smartphone maker in Q3 of 2011, according to Gartner.

And remember, Motorola wasn't the only Android phone maker to stumble in Q4 -- Taiwan's HTC saw drastically slowing sales. That makes Samsung's relative outperformance all the more impressive.

As for Apple, there's simply been a mountain of bullish commentary from companies like Broadcom (BRCM), Qualcomm (QCOM), and AT&T (T) regarding sales of the iPhone 4S. (See: Broadcom Joins AT&T and Best Buy in Piling Up the Ammunition for Apple Bulls.)

Unlike every iPhone in history, the 4S debuted in the fourth quarter, a factor at least partially responsible for the tough times at Motorola and HTC.

So going forward, when we factor in Research In Motion's (RIMM) stumbles, it really does look like Samsung and Apple are dividing the world between them.

Twitter: @MichaelComeau

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Position in AAPL
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