MMI Offers Low-end Smartphone

Recently, Motorola Mobility Holdings Inc. (MMI - Analyst Report) launched its relatively cheaper android-based handsets called Motorola XT316 primarily targeting the lower end of the market. The new Motorola XT316 possesses a color display, QWERTY keypad as well as touch screen option, which will largely attract young consumers.

The new Motorola device has been launched in China and by mid July will be available in other emerging markets such as Hong Kong, Taiwan, and Latin America where the company is looking to gain traction. It is also believed that by the end of this summer, the low-budget Motorola handset will be launched in the rest of the Asian and European markets.

Another reason for launching such low-priced android handsets is to target the price sensitive customers across China and India. The company intends to capitalize on the lucrative opportunities in the emerging markets by launching such cheaper android 2.2 smartphones. Moreover, Motorola Mobility seeks to expand in the emerging Asian markets as it is continuously losing market share in the U.S.

The popularity of Google Inc.’s (GOOG - Analyst Report) android operating system is mainly because of its user-friendly nature. Currently, the android operating system holds the largest market share (approximately 34%). Another reason for its popularity is due to its open source nature unlike Apple Inc.’s (APPL) operating system called iOS. Hence, most of the well known companies around the world have adopted the android operating system for their smartphones. 

Supported by its hugely popular 3G Android-based smartphones, Motorola Mobility is regaining lost ground in the lucrative U.S. smartphone market through an aggressive marketing strategy and slashing its tablet prices and launching cheaper smartphones.

However, Motorola Mobility is facing intense competition for Apple’s iPhone 4 from Verizon. Even worse, the ATRIX smartphone is not performing according to management’s expectation. Furthermore, Motorola Mobility announced that it has postponed its much-hyped 4G DROID BIONIC smartphone roll out with Verizon by a quarter.

We, thus, maintain our long-term Neutral recommendation on Motorola Mobility. Currently, Motorola Mobility has a Zacks#3 Rank, implying a short-term Hold rating on the stock.

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