Motorola to Make Phones Even Cheaper

Motorola is aiming to cut the cost of producing its cheapest mobile phones even more, from �3.50 to �2.50 per handset in order to improve profits.

It looks like once in a while, Samsung cuts off a mm from the thickness of their phones, while Motorola focuses on cutting off the cost of the phone production little by little. Now Samsung gets to sell the 'world's slimmest' phone, while Motorola is just a few steps away from being known for the 'world's cheapest' one.

Chief Financial Officer David Devonshire declared that Motorola would turn its focus to profitability, even if this means losing market share, because of the company having to face a 'rocky' first half of the year before it gets to see improvements in the second half of 2007.

"We want to make sure our costs at the low end give us the profitability," Zander said during a Webcast of an investor conference. This follows Motorola's weaker than expected fourth quarter earnings and revenue, which the company attributed to the lack of advanced mobile phones produced by them and rough competition for low-end mobile phones that were sold in emerging markets.

Zander also said that Motorola would go as far as to turn down business if a deal means that profit could be hurt. "We're actually going to turn down some deals. I don't know what it will mean for market share. I don't really care in the short term," he said, noting that Motorola needed to change its priorities.

Despite selling more phones than LG, Sony Ericsson or Samsung, Motorola is struggling because it has almost no high end devices to offer. Also, the profit one can take out of $5 mobile phones can't be very high.

Which leads to questioning why Motorola would choose to focus mostly on low-end handsets considering the tough competition and low profit margins. Throughout this year, most major mobile phone manufacturers have picked up on producing a great variety of low-end handsets for emerging markets, with few of them still focusing on providing more advanced mobile phones.