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Imagining A Post-Motorola World

Richard Windsor, the London-based Nomura Securities analyst who has not always been bullish on Nokia, broadcast an interesting research note this morning in which he says the world's No. 1 handset maker "has evolved into a new beast." "Rivals have been contemptuously swept to one side," Windsor adds, "leaving Nokia as the undisputed king of the jungle." Noting that Nokia's market share has broken the 40% plateau, Windsor upgrades the stock to "buy" and forecasts a share price of $42.50, 18% above its current price. This rave is particularly noteworthy in light of a separate analysis yesterday from John Devlin, research director for the mobile technologies group at IMS Research, who asks, "What if Motorola exits the handset business?"

"It may not be a question that many in the industry are asking themselves yet, or at least not out loud, but each poor set of results increases the possibility that Motorola could follow Siemens out of the back door of the mobile phone industry."

Whoa. Devlin correctly observes that, after enjoying a lightning-strike success with the Razr, "Instead of delivering a range of ideas, technologies and form factors, Motorola continued to follow the same formula by searching for the next big hit." And he alleges that "more capital could be generated by splitting up Motorola into separate business units," with relatively successful units like Moto's home networks and enterprise mobility divisions splitting off from the troubled handsets group.

To be sure, Devlin acknowledges that this is currently an unlikely scenario, but it's becoming less unthinkable each time Motorola delivers another dismal earnings report. Handset sales were down 38% year-on-year in the most recent quarter, with profits plunging 84%.

Nokia, meanwhile, saw its profits surge 44% in the fourth quarter, and its worldwide market share is now more than Samsung, Motorola, and Sony Ericsson's market shares combined. Even with handset sales predicted to slow to single-digit growth this year, Nokia is enjoying powerhouse performance in its core business while attempting to shift to being a provider of an array of Web-based services and applications on many different kinds of devices.

"If Nokia can better tackle the U.S. market," my colleague Eric Zeman notes, "it is possible it could gobble more of Motorola's market share."

That could mean there will be one less beast in the handset jungle at this time next year.

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