Motorola’s Loss Is Apple’s Gain: That $2.1 Billion Sucking Sound Is Coming From The iPhone
Erick Schonfeld
31 comments »
Razr anyone? Motorola can’t even give those things away anymore. The once-proud company reported horrible earnings today, with sales down 21 percent and a net loss of $194 million. But the big takeaway was the 39 percent collapse in its mobile phone business. Mobile device revenues in the quarter dropped $2.1 billion compared to last year.
Coincidentally enough, that is almost exactly how much Apple made last quarter over the past three quarters on iPhone sales. That figure comes to $2.3 billion (including lumped-in sales of Apple TVs, which likely made up a very small portion of that total). During yesterday’s earnings call, Apple CFO Peter Oppenheimer spelled this out:
We sold 1.7 million iPhones during the March quarter . . .. Total revenue recognized during the quarter from sales of iPhone, iPhone accessories, and payments from carriers was $378 million. Total deferred revenue from iPhone and Apple TV was $1.93 billion at the end of the March quarter.
Add those together and you get $2.3 billion. That deferred revenue he is talking about is what Apple collects from its share of monthly subscription fees from AT&T and other carriers partners—an arrangement that Motorola has never been able to negotiate for its phones. So not only has the iPhone replaced Motorola-class phones as the mobile device of choice among consumers, but Apple is also replacing Motorola’s business model by tapping into that rich vein of monthly subscription fees: An arrangement, by the way, that has been as good for AT&T as it has been for Apple. [Clarification: The deferred revenue is a cumulative figure since Apple started selling iPhones in mid-2007. Last quarter, Apple added about $500 million to that cookie jar).
Here is the segment revenue line for Motorola’s mobile business:
I still have my moto razr. It’s 3 years old. Buying a new mobile phone is an unnecessary expense. Besides, everybody and anybody is waiting for the Android compatible one.
Apple didn’t catch me with my pants down. I’m no sucker. I’m waiting for Android. I can’t make native iPhone apps on Eclipse with a plugin.
As a consultant. I would recommend keeping your old razr until the Google compatible phones come out. They will end up killing Apple any how.
Chris - from what I can understand, you simply don’t need or want the features of an iPhone. Don’t blame Apple for this, you just don’t happen to fall into their target market.
I’m glad this is happening so that everyone starts getting into shape and making better products. The razr and all their other phones were only a little better, if at all, then previous ones, however the iPhone took the largest leap, maybe Motorola will do something of their own now.
well this is only because the tazor is the worst phone i have ever had. i mean sure, it’s thin, but it is the widest phone out there!!! i hated putting that up to my face and haveing it cover the entire thing. the iphone is slightly less wide phone and is just an all around better mobile device.
iPhone kick ass!
Motarola needs to get with the picture and realize that they are way behind. They need to release a phone with at least 2/3 the capabilities of the iphone. If they dont do that then people will just stop buying thier products.
New and new innovation from mobile giants like Nokia and Sony Ericsson and now iPhone is sure leading new milestones daily. But I think Motorola line up has got outdated and launching the same line again and again with some edits is not done. As may be you are of aware of Motorola is shutting down its mobile unit soon and will focus on its wireless market and mobile infrastructure only.
good riddance. my razr v3m has been hell. the fucking thing dies after a 45 minute conversation. as soon as my 2 years is up, im getting an iphone.
Good riddence! They haven’t given me any reason to miss them.
browse, i myself am sick of all these plans. I had 2 year contract with Motorola and when it was done i went to Virgin Moblie strait away. im pleased with my no contract. You should give it a try.
@2, I don’t necessarily need them. That doesn’t mean I don’t want the features. It’s the same choice as the old Mac vs. Windows 3.0 choice.
Do I want one that’s closed and open only to web apps or one that I can actively develop for and get a double feature out of?
The gPhone functionality, is topically similar to what widgets on Facebook do.
I decided I don’t want a phone that is as obscure as openMoko, but I do want a phone I can share my own applications with. I think it’s worth waiting a year or so for that. RAZRs can browse the web and can do a lot anyway.
The money isn’t burning a hole in my pocket, and I can wait to make the smarter choice.
That sucks! What the hell am I supoosed to do now? I still have two years untill i get my next phone.
“So not only has the iPhone replaced Motorola-class phones as the mobile device of choice among consumers…”
Um, you may want to look at Apple’s sales figures again as there are +250M mobile phone subscribers in the US.
Give the other companies time, and they will produce something similar (probably not as good) to the iphone.
Palm and Motorola’s mobile phone division are in trouble. They could even merge. Or, Motorola’s phone business may go to Dell. We will see some consolidation for sure.
Motorola is on a downward spiral, it has been for a while…right after I bought into it. Though I was also smart enough to buy into Apple right before the iPhone release. The difference between Apple and Motorola is an obvious one, Motorola banked on their past success in the handset market while Apple was practically new to the market and banked on their computer sales.
Apple seems to outshine everyone else now, other companies blame the current weak consumer spending while Apple fights against that notion by adapting.
If you’re one of the people in the previous posts waiting for your 2yr AT&T contract to expire so you can get an iPhone: you don’t need to.
When you buy an iPhone, your contract date is pushed to 2yrs after you bought it, regardless of what your current contract is. So, if you have 1yr left on your contract and you buy an iPhone today, your contract will expire 2yrs from now without any additional fees.
Of course, if you’re with a different carrier waiting for your contract to expire so you can switch to AT&T, that’s a different story.
I thought the deferred revenue was required for accounting purposes so they could give new features without charging for them? Also wouldn’t the payment from carriers item be the money they get for monthly subscriptions?
Apple’s share of the monthly subscription fee isn’t deferred revenue, it’s revenue that they don’t even have yet - so they can’t really book it, let alone defer it. This is also why the deferred revenue lists the Apple TV.
You are giving waaayyyy too much credit to Apple. The iPhone is a tiny fraction of cell phone sales.
Yes, Motorola has been displaced as the default phone offered by every major carrier; but the newer, better, cheaper devices are coming from Samsung, Sony Blackberry, LG and HTC — not from Apple.
Don’t get me wrong. The iPhone is generating a ton of profit. Kudos to them for that. But in terms of units, it’s a nit.
Motorola is in the shitter but I don’t think you can say that it’s solely due to the i-phone. The people who bought an i-phone probably would have bought another smart phone not a razr.
If Motorola plans to stay in the cell phone game, here’s a suggestion: open source the design (physical design, software design…maybe even hardware) and allow anyone to build apps for it.
iphone has taken some of that, but the assumption that dollars vs. dollars as an equal shift is erroneous, as the devices sell at different price points. So, it’s not an apples-to-apple comparison (pun intended.)
But the major point — revenues off 39%? WOW. Talk about market forces at work.
With as skewed as the US mobile market is with oligopoly lock-in type practices, the slightest dose of competition and innovation really can clobber those who don’t improve their products. Motorola got what they had coming to them.
Not surprising at all. I purchased a Motorola phone a few months back after my Nokia died and cant stand it any more. It takes 40 seconds to load and the GUI is soooo retarded. It takes 3x as long to send sms messages etc.]
Never again.
I want to fire verizon wireless right now. I certainly don’t want another cell phone after my contract expires.
The whole cell phone industry is a scam.
While I don’t doubt the iPhone for a good chunk of their loss, I don’t think a similarity in the figures proves anything. I’d bet a lot of those people just switched from a RAZR to something else since RAZRs just don’t have much of a cachet anymore and have their own problems.
That is the most pathetically tenuous link ever, Motorola’s losses are so
unlinked with the iPhone it’s untrue considering how different their devices are in almost everyway. The pure fact that you felt the need to post this is enough to make me vomit.
why’s the correction here?
Apple made last quarter over the past three quarters on
Another sucking sound comes from TechCrunch on Jobs’ member. Are you payed or just simply Mactards?
any company which makes a phone that deletes the text message your writing when you get a phone call deserves to go under.
Erick,
I think you’re comparing Apples and Oranges here (no pun intended).
The fact that Apple revenue = $2.3B and Motorola loss = $2.1B is a coincidence only. Apple is making their money selling a small (in mobile market terms) number of phones for a very high price, while Motorola primarily competes in the mid-tier market.
Motorola’s losses this quarter went to Samsung and LGE, who build equivalent phones.
Just because Apple’s gain is approximately equal to Moto’s lost, doesn’t mean they are related in the least. How do you know that the Razr customers are upgrading to Apple and not simply buying other feature phones? The data you present is interesting however suggesting A therefore B without any customer behavior data to back it does both journalism and data analysis a disservice.