Motorola Mobility Holdings Inc. (MMI) has finally launched its next-generation (4G) Long-Term Evolution (LTE) technology enabled XOOM tablet. This product was launched in mid-February 2011 with Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group plc. (VOD). Yesterday, Motorola Mobility and Verizon Wireless jointly announced that the existing XOOM owners will be able to upgrade their tablets to 4G LTE from September 29, 2011. The new 4G LTE XOOM will be available from Verizon Wireless stores for $499.99 from October 13, 2011 for a two-year data plan.
XOOM was the first device to run on Android 3.0 Honeycomb operating system, specifically designed by Google Inc. (GOOG) for tablets. However, its 4G LTE version was delayed for nearly 6 months. Meanwhile, Samsung Electronics introduced its Galaxy Tab 10.1 tablet, which is capable of supporting 4G LTE network. As a result, Motorola Mobility already lost some ground to Samsung. The 3G XOOM performed far below the iconic iPAD 2 tablets of Apple Inc. (AAPL) in the previous quarter. Motorola Mobility sold 440,000 XOOM in the second quarter of 2011 compared with a massive 9.25 million iPAD tablets.
From September 8, 2011, Motorola Mobility started selling its first 4G LTE smartphone DROID BIONIC with Verizon Wireless. DROID BIONIC was also delayed by more than 3 months due to some technical faults. Therefore, Motorola Mobility has also lost the game to both Samsung Electronics and HTC Corp., which launched 4G LTE smartphones before Motorola Mobility. These delays of product launch raised some eyebrows regarding the company’s 4G LTE capability.
Nevertheless, several industry analysts expressed their confidence that XOOM 4G LTE and Droid Bionic may turn out to be game changer for Motorola Mobility. XOOM 4G LTE supports average download speed of 5-12 Mbps and upload speed of 2-5 Mbps. It will also have backward compatibility with 3G network of Verizon Wireless. Motorola Mobility earlier declared that it expects its core Mobile Devices segment to achieve profitability in the fourth quarter of 2011 primarily leveraging on Droid Bionic and XOOM 4G LTE.
In the meantime, in August 2011, Google has entered into a definitive agreement with Motorola Mobility to acquire it for approximately $12.5 billion. The deal is subject to the regulatory approval and customary closing conditions. We maintain our long-term Neutral recommendation on Motorola Mobility. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.
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