Is Motorola Losing Focus: The Software Dreams of a Hardware Player

Implications: * Due to their failure to innovate, RIM has attracted an ocean of competitors
* Motorola's attempts to diversify in the face of eroding margins fail to address their core problems on the handset side
* In the long run, software companies will win the software provision battle

Analysis: Motorola's margins slipped steadily toward the latter half of 2006 as the RAZR lost its luster.  No matter how they defended their product in terms of market share, it is obvious that price reduction was the only way they would hold onto customers.  Instead of recognizing this failure to innovate their handset product, or even better, the wireless handset experience, acquiring Good Technology is another tact ... own the downstream software.

RIM has opened the door wide open for this to happen by failing to innovate its email delivery platform and by failing to innovate its device.  Now, there is a feeding frenzy, and Apple has jumped in with its iPhone product with push Yahoo.  Microsoft will jump in with its soon-to-be-announced Zune phone.  And Google is pushing out great email and other mobile apps to my phone today.

Do you know who will win this battle?  My guess is that it won't be Motorola.  Motorola, a leader in set top box platforms and handsets, is not a software company, nor is it an innovator. 

In the long term, I wouldn't bet all my marbles on RIM either.  Too many smart, innovative competitors are now entering the market.  Look what the iPod did to the music market.  Look at what Google search did to the search and the portal market.  And look at what Microsoft did to the PC market.

Look for a huge couple year's in mobile app development.  Don't expect Motorola or RIM to be on many of those press releases.