“Android provides differentiation today, but may not tomorrow,” says recent Canalys report on Motorola’s market strategy.

During its Q3 earnings call on 29 October, Motorola’s Co-CEO Sanjay Jha announced the company’s quarterly profit of $12 million, up from a $397 million loss a year ago.

Canalys analysts state this was primarily driven by aggressive cost-cutting and the improvement was reflected in a stock price rise of more than 12%.

Despite the overall positive result, the troubles faced by Motorola’s handset division continue. During the quarter it recorded sales of $1.7 billion, but made a loss of $183 million, shipping just 13.6 million devices.

More positively, less than two months after announcing the CLIQ, Motorola introduced its second Android smart phone – the DROID – earlier in the week. The DROID is the first announced phone to support Android 2.0, with all the enhancements that brings.

DROID will be available in the US exclusively from Verizon Wireless from 6 November. It will cost $199.99 with a new two-year contract after a $100 mail-in rebate.

According to the report, Verizon is pitching the DROID aggressively against Apple’s iPhone and the device fills an important gap in the operator’s smart phone portfolio.

“For Motorola, this partnership is an invaluable opportunity to rebuild its status within the handset market and draw attention to its Android-centric strategy,” it says.

For the past year, Motorola has put significant effort into streamlining its platforms, having previously produced an array of smart phones on Windows Mobile, Symbian and various forms of Linux.

The company aims to reduce its reliance on feature phones and will hope to be able to push Android down into higher volume, but more price-sensitive segments over time.

Canalys claims the quick rollout of DROID following the CLIQ demonstrates that the company is moving in the right direction, having suffered from portfolio stagnation following the earlier tremendous success of the RAZR.

Both the DROID and the CLIQ may do well in the US in the short term, but there can be no room for complacency. Over the coming months the market will see a huge influx of Android devices from top-tier handset brands as well as from vendors very focused on delivering devices to operators at lower cost.

“For Motorola to maintain momentum it will need to be able to differentiate itself from the many other Android products that will be available in 2010, and it will need to do this on the international stage. China will be critical. Motorola has enjoyed success with its Linux devices there in the past and it will need to replicate this success and build upon it with its Android devices.”

Analysts conclude that the company will also need to ensure that the devices it produces compete on quality as well as price, ensuring that a focus on getting Android into the middle-tier of the market does not result in compromises that lead to products that deliver an inferior user experience.

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