Motorola Mobility Downside Scenario From Slipping Market Share

NEW YORK (Trefis) -- Mobile Phones account for around 30% of Motorola Mobility's (MMIWI) stock, based on our estimates, and any change in the company's mobile phone share can have a profound impact on its stock price. Motorola's mobile phone share has tumbled down from a high of 22% in 2006 to less than 3% currently due to lack of technological initiatives and innovative products and strong competition from formidable players like Apple (AAPL), Nokia (NOK) and Research in Motion (RIMM) in the smartphone segment.

We expect this decline to continue, although at a slower rate, reaching 1.5% by the end of Trefis forecast period. However, if the share decline lessens to around 2.4%, as predicted by Trefis members, this can create a potential upside of 24% to MMI stock.

We currently have a Trefis price estimate of $19.32 for Motorola Mobility's stock, which is well below 35% the market price.

Limited Offerings of Innovative Handsets

Motorola saw a high market share in 2006 owing to its popular handset RAZR, but its rage has died down amid the technologically better breed of smartphones sold by RIM and Apple. Absence of a branded product like Apple's iPhone or RIM's BlackBerry has cost Motorola heavily on its market share. It has particularly lost share in North America due to lack of technological innovation and limited offerings of 3G products.

Motorola is trying to make a comeback by offering a fresh breed of smartphones like Cliq, Bravo, Droid and Moto powered by Android operating system, which is gaining wider adoption by the day. Of its handsets offering, Droid X is particularly doing well, having featured in top 10 smartphones for 2011 in terms of design, multimedia and memory features.

Superior Product Portfolio of Competitors

Increasing competition from rivals like Nokia, Samsung, Sony Ericsson and LG have taken a toll on Motorola's market share. Motorola has not been able to compete with these players, who have continuously launching newer and better products in the 3G segment. The handsets market is also getting crowded, with entry from Chinese players like ZTE and Huawei, who are offering comparable quality of handsets at cheaper prices.

Trefis Community Forecast

Trefis members predict Motorola's mobile phone market share will decrease from 3.5% in 2011 to 2.4% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of a decrease from 2.1% to 1.4% during the same period. The member estimates imply an upside of 24% to the Trefis price estimate for Motorola Mobility's stock.

Our complete analysis for Motorola Mobility's stock is here .

Trefis members constitute more than tens of thousands of users of the Trefis platform, inclusive of investors, financial analysts, and business professionals who use the Trefis platform to create their own models and price estimates.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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