May 15, 2007 3:16 PM PDT
Is Motorola's cell phone revamp enough?
Motorola, the second-largest handset maker in the world behind Nokia, has been struggling to regain its footing in an increasingly competitive market for the past several quarters. For the first quarter of 2007, the company reported a net loss as prices on phones continued to plunge.
Chief Executive Officer Ed Zander, who ended a bitter proxy fight with billionaire shareholder activist Carl Icahn last week, was on hand at an event here Tuesday to show off the company's five new handsets. Zander has been promising a new set of products that will help the company regain profitability.
Motorola's latest products, which will all be available this summer, clearly take the company in a new direction. Instead of concentrating solely on style and design, it has added more functionality such as 3G, or third-generation, network support and multimedia features.
But critics say Motorola's new products are nothing more than souped-up versions of devices the company has already been selling. Four of the phones highlighted Tuesday, in fact, were new versions of existing products.
"While we are encouraged with the company having introduced 3G, feature-intensive devices, we question the ultimate success of these devices given the lack of traction for the company's Krzr phone," Bill Choi, a senior analyst at Jefferies, said in a research note published Tuesday.
As expected, Motorola introduced the follow-up to the popular ultrathin Razr with an even thinner phone called the Razr2. The Razr has been one of the best-selling cell phones on the market since it was introduced in 2004. Motorola expects to sell its 100 millionth Razr in the next few weeks, Zander said.
While the Razr franchise has helped Motorola increase its market share over the past couple of years, the company's executives have been criticized for commoditizing the product by allowing mobile operators to slash prices on the phone to entice subscribers to sign up for service. Today the Razr is available from every major carrier in the U.S.
But Zander clearly believes the Razr brand is strong enough to continue anchoring the company's product line.
"The Razr is more than a product, it's a brand," Zander told reporters and analysts at Tuesday's event. "When I reach for a tissue, I grab a Kleenex. When I order a soda, I say I want a Coke. And even when I talk about an MP3, I call it an iPod. The Razr is also a brand, and we will market that for years to come."
Zander said the next-generation Razr, the Razr2, is slimmer, sleeker, stronger, smarter and yet simpler and more stylish than its predecessor. The device comes in two versions: the V9 for GSM networks and the V9m for CDMA versions.
While Motorola improved the Razr's design by making it even slimmer and also made it more rugged, the real difference between the old and new Razr is on the inside. The new phone supports a full HTML browser that enables Web surfing even on non-WAP enabled sites; a faster 500MHz processor and USB 2.0 support for faster music downloads and PC syncing; video conferencing capability; and new voice technology called "Crystal Talk" that will adjust the volume of the voice call based on ambient noise. The Razr2 is expected to be available on all major U.S. operator networks later this summer.
While the Raz2 packs an impressive array of functionality into an improved design, analysts are skeptical that it will have the same impact on the company as the original Razr.
"Motorola sorely needs a hit or several iterations of success to turn around its mobile-handset division, which despite strong unit growth, is suffering from a lack of profitability," Mark Sue, an analyst for RBC Capital Markets, wrote in a research note to investors. "The reception for the Razr2 may be decent since a market exists for a sequel. (But) it may not be enough to enable significant market share gains."
Motorola executives also emphasized the company's breadth of devices. They seemed to recognize that relying solely on one product, such as the Razr, is dangerous.
"It's important to remember that Motorola invented thin phones," said Jim Wick, vice president and director of the Consumer Experience Design group at Motorola. "And we will continue to do thin. (But) going forward it will be far less about one particular product. Instead it will be a suite of products that defines our brand."
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