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Motorola Mobility Looks Good on Paper

Stocks in this article: MMI AAPL GOOG

NEW YORK ( TheStreet) -- If incremental profit growth and gradual product rollouts defined success in today's mobile device market, then Motorola Mobility (MMI), which reports second-quarter earnings after the bell Thursday, would top every investor's list this year.

Unfortunately, innovation as it relates to consumers' desire for the next great gadget moves at a steady breakneck pace, and Motorola, whose promising 2011 product launches have either been delayed or half-baked, has fallen behind.

The company, say analysts, isn't likely to see big market gains until next quarter, when its 4G products firmly hit U.S. shelves and it cements further gains in China.

"We believe 3Q is a window of opportunity for Motorola," wrote Barclays Capital analysts Jeff Kvaal in a recent note, "three launches and competitive slips should allow the company to gain share at key customer Verizon (VZ)."

Until then, the company, which is ending its first full quarter as a newly split entity from network solutions-focused Motorola Solutions (MSI), should continue its slow recovery. Analysts are expecting the firm, whose first-quarter global market share has slipped from 2.7% to 2.1% in the year-ago period according to Gartner, to post its first, albeit modest, profit.

The consensus is calling for earnings of 6 cents on quarterly sales of $3.12 billion.

They also see quarterly phone shipments arriving in line with the consensus 4.4 million, with much of that coming from Motorola's firm footing in China, where research shop IDC estimates that the company, capitalizing on the losses stemming from leader Nokia's (NOK) big platform shift, holds the fifth spot in terms of greater China smartphone market share. In the past quarter, Motorola has launched six beefy Android smartphones there, as well as its new Xoom Android tablet.

"Motorola's market share in China is higher than its global average because they invest a lot of resources there to provide localized models," said Roberta Cozza, principal research analyst at Gartner. "But the big problem here is that they are very reliant on Android, and it's very tough to differentiate in this market."

Cannacord analyst T. Michael Walkley recently wrote that while Motorola is enjoying strong China sales, the firm is starting to lose market share to fellow Android handset-makers like Samsung, LG, HTC, Huawei, and ZTE. And then there's Apple (AAPL), whose surprising 20.3 million phones shipped in the second quarter was fueled by sales in China.

"Motorola looks great on paper -- they're in a good spot now," said Ramon Llamas, a senior research analyst at IDC. "But here's the thing: they're not the only ones amping up the competition."

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