According to the Wall Street Journal article, Apple, RIM Outsmart Phone Market, (sub. required) by Sara Silver, the smartphone companies Apple and RIM have counted for 3% of the cell phone market by sales, but made 35% of the operating profits. An enviable position that keeps Motorola choking in the dust and basically wearing high heels to the track meet. Motorola delivered some 10% of the market’s revenues but have themselves making some -15% (that’s right, NEGATIVE 15%) of operating profits. The fabled mobile electronics company is subsidizing Apple and RIM shareholders.

What a sad and rapid fall from grace. Five short years ago Motorola created the ‘RAZR’ generated over $50 billion in cummulative sales and catapulted itself to the forefront of the cell phone industry, with a sexy, small and elegant flip-phone which totally caught Nokia (the market leader) and the rest of the cell phone companies by surprise. But what Motorola did not do is effectively capitalize on that success with a second hit new product category.

Their attempts with RAZR-like new categories didn’t pan out and the Q, based on the Microsoft Windows Mobile was as dull as the Palm at the time. Now, the differentiator is not just cool electronics, but cool software. Motorola is sadly weak in software technologies.

Apple and RIM are getting such high profits (35%) from such humble market share of 3% is simple but hard to do. Their products are high-end, high priced complete mobile devices where the company controls the device engineering, the operating system and the application store. The BlackBerry and the iPhone are way more than just mobile phones. They have managed to integrate the lure of browsing the internet with mobile phones, of retrieving email with mobile phones and making the mobile device the fundamental cornerstone of managing their lives. It’s more of a personal assistant than just a communications platform.

What Motorola should do is take a long hard look at the mobile phone product line. They need a strategy to create at least one new category of mobile devices that must be able to compete with the BlackBerry and with the iPhone. It would be great if it was an enterprise-oriented device… but lets not get ahead of ourselves.

Update August 3, 2009:

[readon1 url=”http://gigaom.com/2009/07/30/is-googles-android-killing-windows-mobile/”]MOT bets on Android[/readon1]

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