Motorola Buys Aloqa to Make Its Smartphone Software More Special

Motorola announced Thursday that it's snapping up location-based software maker Aloqa, as part of its strategy to differentiate its smartphone line with the help of software.

With Aloqa's technology -- which identifies a smartphone user's location and then pushes information to it about nearby events or special daily offers from local merchants -- Motorola (MOT) is seeking to address its greatest challenge in transforming the struggling company into a profitable venture.

"The biggest piece of work for us is creating software differentiation and creating an organization which uses software as efficiently and as well as some of the Internet players do," said Motorola Co-CEO Sanjay Jha, during a webcast Wednesday at a Deutsche Bank technology conference.

Jha estimated Motorola is 30% to 40% down that road in creating a competitive smartphone lineup. For the big players in the mobile handset industry -- companies that not so long ago were able to follow a comfortable pattern of first getting software specifications in hand, spending three months developing the software and then another six months testing it -- the largest issue now is grappling with the much faster-paced new dynamic software development environment.

"Now there are no specs and the only thing you have to worry about is consumer satisfaction," Jha said. "You can't have three months worth of development and six months of testing, you have to continually evolve your software and it's a much more dynamic software environment. I think we've made a good start there, but we have a long ways to go."

This is something investors should watch for, as the company prepares to divide itself in two during the first quarter of 2011. In February, investors cheered Motorola's announcement it would split the company, creating one new public company aimed at consumers that would house its mobile handsets and set-top cable box division, and another that would consist of its wireless and networking businesses for large corporations -- a move that billionaire investor Carl Icahn had previously waged war with the company over as a means to unlock shareholder value. Jha will serve as CEO of Motorola Mobility after the split.

Getting From a Good Name to Better Sales

The importance of dynamic software for mobile phones is further reflected in comScore's July U.S. Mobile subscriber market share results, which were released Wednesday. For example, Web browsers were used by 33.6% of users in July, up 2.5 percentage points from the previous quarter.

Here are a few other reference points:

Meanwhile, Motorola is also working on leveraging its well-recognized brand name to improve its results in the late leg of sales, what the business world calls "intent to purchase."

"Our consumer brand recognition is very good, consideration is very good, but intent to purchase is not very good," Jha said. However, he says, things are beginning to turn around for Motorola.

In October 2009, consumers' intent to purchase a Motorola phone was approximately 1%. Now that it has introduced its first smartphone, that number has risen to roughly 9% to 12% Jha said.

However, the July figures from comScore still show Motorola is struggling for market share among U.S. mobile subscribers. The company posted the largest percentage drop over the previous quarter and dipped below the 20% slice of the market.

These results, however, may show dramatic improvement when the next comScore quarterly figures are released. Motorola's Droid X was a sold-out success soon after its July debut, and ongoing sales of the smartphone undoubtedly will help the company's forecast to achieve profitability in the fourth quarter.

"We've made good progress in the last two years," Jha said. "We've re-focused the organization on smartphones, increased our gross margins in the last three quarters and promised to be profitable in the fourth quarter. I feel we're increasingly making good progress."

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