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Tuesday, January 29, 2008, 03:00 pm PT (06:00 pm ET)

Motorola may bow out of cellphones, aid Apple and rivals

After struggling for years to regain the success it had with the RAZR, Motorola may soon quit the cellphone industry altogether, according to research by a Nomura investment analyst.

Richard Windsor of the London-based firm explains that an investigation suggests Motorola would drop the segment entirely and instead focus on its enterprise and government sectors.

Talks of a Chinese takeover, however, are an "old chestnut" that isn't likely to come true unless a buying firm knows how to mend Motorola's business, the analyst says. Instead, the American company is most likely to become profitable only after enduring a "very difficult" 2008.

Motorola is already said to be suffering, and in the fourth calendar quarter of 2007 reported a 38 percent drop in its mobile device sales compared to the same period a year ago — a stark contrast to an industry widely agreed to be growing over time. The departure of Ed Zander from Motorola's chief executive spot in mid-quarter is understood to have been partly driven by the increasingly poor results.

Most of the reasons behind the plummeting welfare of the Motorola division are understood to stem from its emphasis on individual devices. By ignoring software and the platform as a whole, Motorola has essentially given Nokia a two-year lead, Windsor says.

The researcher sees this as a trend for other handset makers as well. Other leading cellphone designers such as Samsung and Sony-Ericsson are also expected to prey on Motorola's vulnerability. Though still small, Apple has also been cited in industry surveys as stealing marketshare and perceived influence from Motorola with the iPhone.

For Apple, a Motorola departure would only serve to vindicate its decision to create its own handset. The failure of the ROKR E1 music phone in both its awkward hardware and feature-limited iTunes software were reportedly frustrating enough to Apple head Steve Jobs that he launched an end-run around Motorola, discussing an Apple-made phone with Cingular (now AT&T) even before the ROKR reached store shelves.

Since then, Motorola has continued to develop the ROKR line on its own with different music software; an eighth generation, the E8, was announced at the Consumer Electronics Show this month.