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Analysts: OS Focus Could Boost Moto's Prospects

Reports have Motorola announcing as soon as Thursday a big push to build new Android phones, but the more important move would be a potential plan by the handset maker to reduce the number of mobile operating systems it uses, analysts said.

On Wednesday, a Wall Street Journal report suggested that during Motorola's Thursday morning third quarter earnings call, the handset maker might unveil plans to focus development on Android and reduce the number of operating systems it uses. Android is the operating system developed by Google that first appeared just last week on the G1 phone built by HTC.

Analysts agreed that choosing to concentrate on just a few platforms would be a good change for the struggling Chicago-area company. "Over the last several years, they've had a one-off of everything," said Jack Gold, an analyst at J. Gold Associates. "If you're trying to do that it's hard to concentrate and get it right."

If Motorola is planning to back Android in a big way, that could happen at the expense of Symbian, said Gold. It doesn't make sense for Motorola to build phones long term based on both platforms, which target generally the same market, he said. Motorola might choose Android over Symbian because Symbian is likely to be unstable in the near future as it goes through its stated plan to become open source, he said. In addition, Gold is predicting that Symbian and Android might somehow merge. "It makes sense not to have multiple open operating systems," Gold said.

Motorola has a stormy history of developing iconic, cutting edge phones followed by prolonged dry spells that threaten the company's existence. Most recently, it built the wildly successful Razr, but in the four years since its launch Motorola has failed to come out with another hot seller. Phone sales for the company have plummeted, from 35 million handsets in the second quarter of 2007 to 28 million in the second quarter this year. Quarterly financial losses have accompanied the drop in sales.

Narrowing its focus could help. Motorola currently makes handsets based on Windows Mobile, Symbian and Linux in addition to several proprietary platforms for low-end phones.

Overall, the more that handset makers focus, the more likely they are to be profitable, said Bill Hughes, an analyst with In-Stat. Nokia, BlackBerry and until recently HTC, all essentially use just one operating system and they are all profitable companies, he noted. LG, Samsung and Motorola all support multiple platforms and none is profitable. "It's hard to say if that's a cause or an effect, but it's an interesting observation," Hughes said.

The analysts did not expect Motorola to support just one operating system, however. The handset maker is likely to continue making Windows Mobile phones targeted at high-end enterprise users and perhaps consolidate down to just one platform for very low-end feature phones. "But that leaves a big chunk in the middle. Android could provide focus there," Gold said.

Android is a likely choice given clear indications that Motorola is staffing up a new group to build phones based on the operating system. One recent job posting on the handset maker's Web site seeks a senior software engineer to work on an Android smartphone. The posting describes a new division within Motorola "with the mindset of a startup, executive level sponsorship and deep funding."

If Motorola does decide to focus on just a few platforms, the move will be challenging and will require a significant cultural shift, said Hughes, who worked for the giant a decade ago, although not in the handset division. Traditionally, Motorola has believed in volume, so when an operator asks the company to make a phone based on a specific operating system, the company has "culturally been unable to say no," Hughes said. "When someone says to them, 'I want to order X million units if you use this OS,' they don't have it within them to turn it down."

Reducing the number of operating systems it supports and turning away some orders would be a big undertaking, he said. "It would be something very Motorola-like to try, but whether they succeed or not... If they announce this and succeed I'll believe they have a different culture. And by the way, the last four CEOs at Motorola have come in planning to change the culture and they were unsuccessful," Hughes said.

In August, Motorola hired Sanjay Jha, a former Qualcomm executive, to serve as co-CEO of Motorola and run the handset business, which the company plans to spin off next year. He fills in for Greg Brown, president and co-CEO for Motorola, who had been temporarily running the handset business after Stu Reed quit the job in February.

Motorola declined to comment on any planned announcements regarding Android.

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