Motorola's credit reduced to junk status

Motorola's long-term corporate credit rating was lowered to junk status by Standard & Poor's on Friday as the company continues to suffer from declining mobile handset sales.

The company's rating fell two levels, making it just one notch below investment grade, according to S&P. Moody's Investors Service said earlier this week that it may downgrade Motorola's debt to a level that is just two levels above non-investment grade.

These rating services are downgrading Motorola's credit and debt because the company's mobile handset business has been in serious trouble for more than two years.

And it doesn't look like things will get better for the company anytime soon. In late October, Motorola co-CEO Sanjay Jha told investors he doesn't expect the handset business to get back on its feet until at least early 2010. The problems are so grave at the company, which reported huge losses for the third quarter, that Motorola is delaying its planned spinoff of the handset division and restructuring the entire business in the hope that it can finally create products that will excite consumers.

The company's No. 1 problem is that it has not had a hit phone since it introduced the ultra-thin Razr in 2004. But even worse than not having a hit phone, the company seems to have entirely missed a significant paradigm shift in the handset market. Consumers are moving away from traditional feature-based cell phones, such as the Razr, and moving toward more sophisticated smartphones, like Apple's iPhone.

In fact, the iPhone surpassed the Razr as the most popular phone in the U.S. for the third quarter, according to NPD Group.

Motorola hasn't ignored the smartphone market entirely, but the handful of Windows Mobile phones it has sold have not fared well. In addition to tough competition from Apple, Motorola faces competition from Research In Motion with the BlackBerry as well as from Nokia, currently the worldwide mobile handset leader.

Compounding Motorola's internal issues is the fact that the world economy is worsening. And outlook for sales of all mobile handsets is expected to be down for the fourth quarter and into 2009. Nokia has lowered handset sale expectations twice in the past month, citing the rising value of the dollar and reduced demand in developing markets for its products. But high-end devices are also in less demand. RIM recently announced that it's fiscal third-quarter sales will be lower than expected in part due to the economy.

[the_redistributor]

The Motoroal Q's a Smartphone? What gives? Do you mean touch screen style smartphone??

[pmfjoe]

@ the_redistributor

You missed a sentence:
"Motorola hasn't ignored the smartphone market entirely, but the handful of Windows Mobile phones it has sold have not fared well."

[Earl Benzar]

I guess this and Sun are the legacy of smilin' Ed Zander. What a trainwreck.

[Maarek Stele]

I think Motorola should move into overdrive with it's new Android phone that they are developing. With the new phone, it'll be the cheapest in the US markets with a real OS other than PALM's. The price of the phone will be $150, and on another network other than T-Mobile's possibly.

Kogan Electronics has released an Android phone Costing $160 USD without any contracts.

[kakilambe]

It seems to me that any one of these phone makers would reap a profit if they would stop limiting (locking) their phones to a particular carrier. Also, there are many of us older clunkers who don't WANT to watch tv on our phones, and don't care much about texting. Just a phone that works well, lasts more than a year, and doesn't cost an arm and leg. Just my two cents. Happy Holidays to all, by the way....

[betelgeuse68]

Motorola is a has been. I've had great insight into its incompetencies on account of an old college friend. He survived layoff after layoff after layoff.

Later, I told him about an acquisition Motorola made of a company in Seattle named "4th Pass". I mentioned it because I had resided in Seattle and I had occasion to talk to 4th Pass. His immediate comment was, "Well, I'm sure they'll f*ck up that acquisition before too long." Sure enough, a year later, layoffs, the departure of 4th Pass' founder and an article that quoted a Motorola VP's sugar coating an acquisition that had gone awry.

Motorola is an anachronism of yesteryear. They had a propensity to want to control everything in the mobile software stack but unfortunately for them, didn't have the personnel to execute on such idiotic zealotry. Time to pay the piper.

[Imalittleteapot]

Motorola has got some problems. I liked the look of the RAZR 2, but here's why I didn't get it. I have a Razr now and mostly use it for texting. With my current phone it's one button to get to my inbox, but I still don't like the menu layout. Some of the menus make perfect sense. Others look they were designed by a crack head and aren't organized at all. Specifically the settings menu which is in neither alphabetical order or logical order and is not labeled well.

Like phone status. What is phone status? Is it in the hospital or something? It doesn't have a Bluetooth menu. It's called connection menu. Well what connection? Oh, it's the Bluetooth as if the phone doesn't connect to anything else. Then it has call forward and in call setup menus that could be combined. It also has a personalize setting and then a themes setting and a ring styles setting and an initial setup menu that should be sub options of personalize, but they are not. But nevertheless once configured it's pretty easy to use. The settings menu doesn't get used that much after all right?

Well anyway, I thought it would get better with the Razr 2, but it actually got worse. I couldn't figure it out at all. Maybe there's a quicker way, but I swear trying to get to the inbox or any other option seemed like it took going through four or five sub menus and they didn?t load that quickly. It wasn't fun to use the phone in other words. It was work to find the options. So, I just put it back down. Maybe there's a button for texts or you can configure a shortcut key, but the menu system was just a total mess.

Anyway, Motorola just needs to make a quality phone with a big screen that focuses on texts, emails, messing, and web browsing. Then organize the menus so those things can be used productively without confusing people. Then make the battery last as long as possible. Then make a second that caters to the people that JUST WANT A PHONE and don't want all that crap. Then just have two phones. You don't need 120 different models of the same thing like the big three do with their cars. Make two phones and send everyone else home.

[pheenicks]

It's as simple as this. The wireless carriers don't really want consumers to make use of these devices, they just want us to pay all the costs as they build bigger and better networks. The next two to 5 years will tell us a lot. With the new administration "rolling out" "infrastructure", we could finally see a change in the adoption of hand held and mobile computing use. We could possibly see a shift from two year contracts and B$ monthly bills to great "on the house" wifi coverage - with a signifcant rise in the cost of devices (after all the industry has to get a roi somehow right?). IMO it's about time. I'm in the crowd that decided back when XP was born that we weren't gonna play the "keep up with the Jone's" game anymore. Smart folks decided 7 years ago they were tired of shelling out anywhere from 500 to 1500 bucks every 4 to 7 months just to have the latest gear; thinking all the while with every purchase that maybe it would do for a couple years just to find out a few months later it would be something they wouldn't be able to give away on ebay. Things like your razor. Yeah I know you paid what some 550 bucks for that thing new right? And it was hot for how long? Couple months? Yeah. I know. I'd cuss too.
They don't really expect people to use these things they just throw the consumers a new toy every few months in a pathetic attempt to keep sucking new suckers dry. What's the latest new COOL thing? Touch screens. Wow. While I must admit I'm tempted to go buy a new Samsung omnia, they can take their two year contract with the 5 gig cap and shove it.

[crewless]

I think the early ultra-thin Razr phone was an example of Motorola dumping a bad product on the cunsomer and then not standing behind the product. I owned one of these phones with a max battery life of 6 hrs and went thru many battery's. Finally the sprint service tec just started handing out free batteries and said they couldn't fix the problem. Motorola customer service would not even respond..
Anyone who got stuck with one of these phone will probably agree. Motorola should not be in the cell phone business.

[Imalittleteapot]

This is another problem with the phone. The problem isn't the battery. The problem is the phone. Sometimes it gets confused. This is what my wife's did. Sometimes it'll think the battery is dead when it's charged and sometimes it'll think it's charged when it's dead. Changing the battery won't help. Her phone said her battery was dead and shut off, but when I put the battery in my phone it lasted almost another week.

You have to let the battery run dead and take it out of the phone for a couple minutes and then charge it up later. Then sometimes you have to factory reset the phone. Sometimes it doesn't work, but sometimes letting it run dead and removing the battery for a few minutes or resetting the phone will reset it. Every time you do it gets better than before, but it doesn't make any kind of sense when you consider what kind of batteries it uses.

Like our phones last over a week now, but sometimes it just doesn't work on certain phones. It didn't work for my friends Razr. Every time he made a call it said the battery was dead even though we tried all that stuff. Put the battery in my phone and reads full charge and works just fine. I don't know. POS.

[bruceslog]

Wondering if they'll get a bailout.....

[pheenicks]

Like I said above they throw us a shiny new piece of crap every few months just to keep the money coming. Personally, I think they;re wasting more money making crap than what they're making in the form of new users. But then I don't know just how easy and cheap it may be to mass produce, market and distribute junk devices.