Motorola Co-CEO Sanjay Jha on Its New Android Lineup and New Structure

Motorola co-CEO Sanjay Jha
Motorola co-CEO Sanjay Jha

Motorola's co-CEO Sanjay Jha has a busy selling season ahead, and it's going to involve more than just hawking the five phones he unveiled on Oct. 6 to consumers just before the critical holiday shopping crush.

Jha also faces a huge after-Christmas sale: He's got to convince investors to buy in after Motorola splits in two and he takes over as CEO of Motorola Mobility. That transformation is currently slated to occur early in the first quarter, and it leaves investors with the question: Is it time to jump into Motorola's stock?

For Jha, the new role will mean a mandate to deliver strong earnings and revenue growth on the wings of the company's mobile handset and cable set-top box business, especially since Motorola Mobility will no longer be weighed down by the profitable but slower-growth side of Motorola that makes two-way radios and networking equipment, which will be renamed Motorola Solutions.

Investors, however, have been eying Motorola (MOT) with a little trepidation. After all, the big mobile-phone maker has struggled to turn a profit over the past four years since the go-go days of its once-popular Razr, and its subscriber market share has steadily dropped over the past year, falling most steeply among original equipment manufacturers (OEMs) of mobile phones. Within one year, Motorola's installed subscriber base market share has seen its rolling three-month average plunge from 25.3% to 18.8% in August, according to comScore figures.

Adroit Moves With Android Smartphones

But Wall Street is starting to come around and is increasingly feeling bullish about the company's prospects as it focuses on smartphones and the Android operating system. And Motorola's latest lineup of handsets broadens its product portfolio with moderately priced smartphones and an entry into the business sector, where Research In Motion's (RIMM) BlackBerry has dominated, moves that add to Wall Street's optimism about Motorola.

Motorola smartphones
Motorola smartphones

"We believe [Tuesday's] announcement should be viewed as a slight positive for Motorola," says Deepak Sitaraman, a Credit Suisse analyst, in a research note.

He cited Motorola's consistent execution on new product announcements, which topped 17 in the past 12 months; a move toward lower-price Android smartphones to take advantage of the tiered data service plans carriers are rolling out; and Motorola's expansion of its carrier relationships beyond Verizon, which appears poised to begin offering Apple's iPhone early next year on its network.

Motorola's Android lineup includes three new moderately priced smartphones with a two-year contract to run on the AT&T (T) network: Flipout, at $79.99, set to launch Oct. 17 that provides WiFi, Bluetooth and GPS connectivity; Bravo, at $99.99, expected to hit the market before the holidays and offers a speedy 800 MHz processor; and Flipside, at $129.99, to be available for holiday shopping that features a slide-out Qwerty keyboard and trackpad for navigation.

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"MOT is taking smartphones to the next level with numerous mid-range Android devices. We believe MOT is well-positioned to benefit from 'tiered' pricing plans which will take smartphones into lower price points," says Mark McKechnie, an analyst with Gleacher & Co.

Motorola also unveiled Citrus, an entry-level CDMA Android smartphone that will be offered in the fourth quarter on Verizon. The smartphone comes preloaded with Android Marketplace and Google's YouTube and Gmail.

But one of Motorola's most significant opportunities to boost revenue will be the introduction of its high-end Droid Pro. The Android phone marks Motorola's first effort at luring Corporate America into using its devices as company phones. The Droid Pro includes security features such as remote wipe, complex passwords and virtual private networks, in addition to the consumer-friendly features that come with the Android OS and its app market. The Droid Pro is expected to roll out on Verizon's (VZ) network in the first week of November.

After the split, Motorola Mobility will have estimated revenues of $11 billion to $13 billion, with roughly 66% of sales coming from mobile phones and the remainder from its set-top boxes and other items in its home category.

Smartphones are an area where Motorola has been gaining traction over the past year, with its subscriber market share climbing to 7.8% in August from 2.8% a year ago, according to comScore.

"While Motorola's overall market share footprint is shrinking because its legacy Razr is fading, its high-end smartphones, which are the most important part of the market, are growing," says Mark Donovan, a senior analyst with comScore.

That bodes well for investors who are eying Motorola Mobility as a potential growth stock once the company splits.

Profitable Fourth Quarter?

"In general, the story at Motorola is it's a company that had been broken for a long time and is on a path toward recovery," says Jay Goldberg, an analyst with Deutsche Bank. "It is improving, so on that merit, it is worth investing in."

After four years of losses, Motorola is forecasting profitability in the fourth quarter of 2010. That prediction comes despite Apple's (AAPL) rapid rise in the mobile market with its iPhone and iPad.

In an interview with DailyFinance Tuesday, Jha said this about investors weighing a play in Motorola versus Apple:

I am a bad investment advice giver, so I'll not advise any investors. But I will tell you a little bit more about my business. Today, in a report, it said Android was neck and neck with Apple's operating system. We are one of the best proponents of Android smartphones, and I think that it gives us a very good competitive position.

Certainly, the offering that has come out of Cupertino [where Apple is headquartered] has been capable and rational, but I think if you look at our Droid X and look at the feature sets, you will see a larger display [screen], much faster processor, much better browser and much better multimedia.

I think it's a decision that a lot of consumers are making. And if you look at the success of the Droid X, it says there is room for multiple devices and multiple offerings in the marketplace.

We are excited about the five devices we launched today and the entrance we have made in supporting business-ready features in our devices ,and we think we have growth in front of us.

Whether investors share that view will be become more clear as the company moves forward toward splitting into two to unlock that always sought-after shareholder value.