US manufacturer Motorola, the world’s second largest handset vendor, issued a profit warning late Thursday, following poor performance in the devices segment.
Fourth quarter sales are now estimated to be in the range of $11.6bn to $11.8bn, down from previous guidance of $11.8bn to $12.1bn.
The shortfall occurred in the Mobile Devices segment and is attributed to an “unfavourable geographical and product-tier mix of sales”, even though unit sales for the quarter were approximately 66 million, up 48 per cent from the fourth quarter of 2005.
Ed Zander, chairman and CEO said “We are very disappointed with our fourth-quarter financial performance”.
Ovum analyst Martin Garner noted that the problem probably originated during the third quarter, when Nokia and Motorola were locked in intense price competition and it looks as though this has continued into the final quarter.
Ultimately, the success of the RAZR mid-range device has started to run out and the subsequent release of the KRZR has failed to pick up the slack.
Analysts have been warning for some time that Motorola cannot continue to bask in the success of the RAZR. In November, Gartner warned that Motorola was losing ground in sales as well as brand recognition and that the KRZR was struggling to enjoy the same popularity as its predecessor.
At the time, Gartner’s principal analyst, Carolina Milanesi said: “Motorola’s WCDMA portfolio needs to come up to scratch. Its competitors are moving aggressively and winning, not only sales but also brand recognition”.
Earlier this week, the Barron’s markets newswire quoted Pacific Crest analyst, James Faucette, as saying that the RAZR’s reign as the top selling phone in the US had begun to fade quite considerably over the holiday season.
Faucette believes that the two year old RAZR is also struggling in Europe, particularly for post paid contracts.
Results for both Motorola’s Networks & Enterprise and Connected Home segments are expected to meet or exceed expectations in the fourth quarter, the company said.
Motorola will announce its fourth quarter earnings on January 19.