Motorola (MOT): How much do cuts hurt prospects?

Posted Feb 2nd 2009 11:11AM by Douglas McIntyre
Filed under: Products and Services, Apple Inc (AAPL), Motorola (MOT), Employees

The Wall Street Journal reports that job cuts at Motorola (NYSE: MOT) will make it harder for the company to develop high-end handsets that should have strong margins. The paper writes, "In the cellphone industry, companies generally stay profitable either by efficiently producing a broad range of products or developing a hit product."

Does that mean that with fewer people Motorola cannot come out with a device that could sell millions of units a quarter? Maybe not, but maybe Motorola's prospects may be better than they seem.

Although it is a distant memory, Motorola's last wave of success was due to its RAZR model, which changed the industry with its thin case and simple design. It was a "one-hit wonder" and as sales fell so did Motorola's stock. It is still evident that one really good product could turn the company around.

It is hard to say what the product might be, but it is not unfair to guess. The current generation of smart-phones like the Apple (NASDAQ: AAPL) iPhone are large and bulky compared to the RAZR. That may work for people who don't mind having a phone they can't put into a shirt pocket. Motorola could decide to go the other direction. Handset technology has come a long way since the RAZR. Another very thin product with more multimedia and 3G features than the first RAZR might hit a market's sweet spot.

Motorola may be in deep trouble, but it is not out of the game yet. Its shares may have a bright future.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Tags: AAPL, inthenews, iPhone, MOT, RAZR