Saturday, July 6, 2013

"No Good Reason for Smart Phone Profits"

In what has to be one of the most astounding statements ever made by the chief executive officer of a company, about his business, Motorola Mobility CEO Dennis Woodside reportedly has said his company intends to drive down prices for Android devices.

That might not be too big a surprise. Perhaps the more astounding statement is that  "there's no good reason anyone should make huge margins selling smartphones," Woodside said. 

To be sure, price disruption is not unusual in the Internet ecosystem. Many firms have tried to disrupt pricing in a market. But that normally is a strategy employed by attackers, not incumbents. 

Of course, the difference in this case is that Motorola Mobility is fully owned by Google, which has different motivations than the owners of virtually all other handset suppliers. 

Smart phone profits have become a bigger issue recently, as margins seem to be under pressure, with more earnings difficulties  expected. 

The problem is similar to that of tablets, where greater competition is leading to commoditization, with falling profit margins. 

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