July 20, 2006 1:39 PM PDT

Study: Motorola Q positioned for success

Motorola's Q phone stands a good chance of success because the company has controlled costs in its effort to be the first handset maker to price a smart phone for the consumer market, according to a new study.

On Thursday, market research firm iSuppli released a report suggesting the Q's material cost--the total value of all its components--amounts to only $150 per device. When manufacturing expenses are added in, each Q costs Motorola roughly $158, iSuppli estimates.

iSuppli conducted the study by taking the Q apart and pricing each component.

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Video: The Motorola Q
CNET's Bonnie Cha takes a First Look at Motorola's smart phone for consumers.

Verizon Wireless, the exclusive seller of the Motorola Q, is offering the smart phone for $199 with a two-year contract and for $349 with a one-year contract. Verizon Wireless pays about $300 wholesale for the Q, according to some Wall Street analysts.

Even though iSuppli hasn't yet analyzed the cost of building comparable products from competitors, such as BlackBerry maker Research In Motion and Treo maker Palm, analysts with the firm said the Q's low price and inexpensive design will likely be key assets for Motorola as it vies for market share against established rivals and targets the consumer market.

"The challenge for service providers is that they subsidize the cost of the phone," said Dale Ford, vice president of market intelligence for iSuppli. "So anything handset manufacturers can do to keep costs down makes the product more attractive to carriers as well as consumers. Motorola clearly benefits too from the opportunity for better profit margins."

The new Motorola Q, which went on sale earlier this summer, is a cross between a BlackBerry and a video iPod, complete with its own QWERTY keyboard and abundant multimedia functionality. It's Motorola's first foray into the smart-phone category, which has traditionally been dominated by the BlackBerry and Treo.

RIM and Palm have targeted business customers with their products, but Motorola has its eye on consumers. The Q, which sells to consumers for about half the price of a comparable Palm Treo, is a thin and light phone that runs Windows Media Player and has built-in dual stereo speakers and a 1.3-megapixel digital camera.

Motorola has high expectations for the Q, as it follows in the footsteps of the company's stylishly designed phones, the ultra-thin Razr and Slvr. These phones, particularly the Razr, have generated massive sales volumes and helped solidify Motorola's position as the world's No. 2 mobile-phone maker.

While most analysts agree the Q offers consumers a solid smart-phone option at an affordable price, some believe the Q's path to success may take longer than Motorola expects.

"Motorola's initial estimates of the ramp on the Q are optimistic," said Susan Kalla, managing director of research for the equities firm, Caris & Company. "There is a market for smart phones, and particularly for the 'smart phone-lite,' which is what the Q is. But I think it's going to take a while for consumers to realize they need it. It's a very different product than the Razr."

Still, analysts at iSuppli believe Motorola is positioned well in the overall smart-phone market considering the low-cost of manufacturing the Q handsets.

"Motorola is stepping into the smart phone market in a stronger way than they have done before in other markets," said Ford. "The Q puts them in the market with a compelling offering that should help them pick up market share."

See more CNET content tagged:
iSuppli Corp., Motorola Q, Motorola Inc., smart phone, manufacturing

11 comments

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Needs cheaper data plan
The Q is nice but it wont be a huge seller until Verzion Wireless comes up with a more reasonable data plan. The current requirement of a $40/mo data plan in addition to the basic calling plan is just too much for many consumers.
Posted by pete1118 (1 comment )
Reply Link Flag
Pete's right
Pete's right. It's not that the data plans are too expensive. There's this technology that's called Wifi competing w/ mobile broadband. It's a lot cheaper. Motorola hasn't come out and said why the Q isn't Wifi enabled, but I have to believe that Verizon would not sell as many data plans.

I'm sure by the time they add Wifi the data plans will be half the cost. Grrr.
Posted by Sparagi (6 comments )
Link Flag
Pete's right
Pete's right. It's not that the data plans are too expensive. There's this technology that's called Wifi competing w/ mobile broadband. It's a lot cheaper. Motorola hasn't come out and said why the Q isn't Wifi enabled, but I have to believe that Verizon would not sell as many data plans.

I'm sure by the time they add Wifi the data plans will be half the cost and it won't matter anyway. Grrr.
Posted by Sparagi (6 comments )
Link Flag
cheaper than blackberry?
with a 3 year plan i bought my blackberry for $149 CAN from bell.
Posted by Carusk (13 comments )
Reply Link Flag
I disagree with Pete - sort of. But it's not really his fault.
This article is riddled with factual errors. CNet needs a lesson in fact checking & journalistic integrity. A simple visit to Motorola's web site could have cleared up half of this.

#1: "Motorola Q targets the consumer market."
The phone is clearly targeted at the business market - not the consumer market. Both it's design and marketing are completely focused on being a RIM Blackberry competitor which is again, a business device. It has lockdown features to allow companies to prevent the misconfiguration of the device. It has email sync with Exchange Servers & Verizon's own email... not Hotmail or GMail. If this was a "consumer" device like the Sidekick 3, or any of the Nokia/Samsung keyboard-enabled devices, it'd come in different colors... difference holsters... different "backgrounds"... none of which exist.

#2: "The new Motorola Q is a ... cross between a BlackBerry and a video iPod."
This is a stupid comment. The reviewer must have seen the video playback feature, understood what it was relative to everything else it provides that he/she didn't understand and decided to highlight it alone. The device has VERY LITTLE STORAGE for video. Even with miniSD, which maxes out at 1GB per card, you can't store much more than a single movie on the device. Yes, it's a Blackberry replacement as I said before, but it's much more. With EvDO networking support, the device provides 500kbps-700kbps wireless Internet access. I've hooked mine up to my laptop and I surf through the device with amazing ease.

#3: "It's Motorola's first foray into the smart-phone category."
How about the Motorola MPx200 & the MPx220? Resold by AT&T & Cingular as far back as 2 years ago, these phones were hotcakes when they released but poor testing by both carriers resulted in their eventual demise.

So if the device really was targeted at the consumer market, Pete might be right. Even though the data plan would provide EvDO networking and performance around 500kbps, $40 for a data plan is too high for the average consumer.

But it's not for the consumer. It's targetted at the business sector which can afford such fees.

But one last point: For corporate America, the data plan from Verizon is NEVER $40 a device. My company has the data plan discounted for our employees down to $20 a phone but we have 10s of 1000s of Verizon phones. I know smaller companies at the 500 phone level that get $30/data plan contracts. While this might not be cheap, it's not $40/mo as originally stated, and besides - you get what you pay for. No other network carrier provides these kind of speeds other than Sprint, which has sketchy reception. (The reason, our company chose not to use Sprint in the first place)
Posted by bruinsensei (16 comments )
Reply Link Flag
Not Motorola's first Smartphone
The Q was not Motorola's first smart phone. They released the Mpx200 (<a class="jive-link-external" href="http://reviews.cnet.com/Motorola_MPx200/4505-6452_7-30586620.html" target="_newWindow">http://reviews.cnet.com/Motorola_MPx200/4505-6452_7-30586620.html</a>) and the Mpx220 (<a class="jive-link-external" href="http://www.motorola.com/motoinfo/product/details.jsp?globalObjectId=53" target="_newWindow">http://www.motorola.com/motoinfo/product/details.jsp?globalObjectId=53</a>), both which used the previous versions of Microsoft's Windows Mobile OS. They were available for a limited time on AT&#38;T Wireless, and was a flip phone style.
Posted by yukster (1 comment )
Reply Link Flag
Why no WiFi
Because they already know the outcome: No one would use it.

Friend, the Samsung i730 and the Audiovox xv6700 were both "smartphones" from Verizon with built in WiFi, Bluetooth, and EvDO radio support. And no one used the WiFi. There's no need when the EvDo support is so fast.

Remember that WiFi doesn't work in your car, on the sidewalk, in shopping malls, etc. WiFi also doesn't work while you're moving. Even in "campus" environments like a university or a large corporate property, you can't hop from one access point to another and not get "disconnected'.

WiFi will never attain the broad adoption that you're inferring. It's range is simply too limited and too inconveninent for end users.

Now WiMAX on the other hand - that's another story entirely. WiMAX has the potential to overcome all these obstacles however it remains to be seen how quickly it can implemented and how much labor would be involved. WiMAX faces both technical &#38; political challenges such as device deployment (getting users to buy yet another networking radio), subscription revenue infrastructures (who's going to pay for this/invest in this), city/county authorization permits for towers (this one's a doozy - just getting permits to put up a cell tower is often political hell)... all things that cellular carriers have already overcome.
Posted by bruinsensei (16 comments )
Reply Link Flag
What else is there? This is it!!! ...today.
Everyone around me is bickering about the lack of WiFi, expensive data plans, small storage capacity...
Get real, this is not a laptop!
It is small it does email, sms, phone, mp3... and whole bunch of other stuff that can be used on a small screen comfortably.
What else is out there that is that small? Sure you can argue about some other different units with more of this or bigger that, but NONE OF THEM are as slim as Q.
It is an awesome design of useful features. Today.
Posted by Montevale (31 comments )
Reply Link Flag
What else is there? This is it!!! ...today.
Everyone around me is bickering about the lack of WiFi, expensive data plans, small storage capacity...
Get real, this is not a laptop!
It is small it does email, sms, phone, mp3... and whole bunch of other stuff that can be used on a small screen comfortably.
What else is out there that is that small? Sure you can argue about some other different units with more of this or bigger that, but NONE OF THEM are as slim as Q.
It is an awesome design of useful features. Today.
Posted by Montevale (31 comments )
Reply Link Flag
What else is there? This is it!!! ...today.
Everyone around me is bickering about the lack of WiFi, expensive data plans, small storage capacity...
Get real, this is not a laptop!
It is small it does email, sms, phone, mp3... and whole bunch of other stuff that can be used on a small screen comfortably.
What else is out there that is that small? Sure you can argue about some other different units with more of this or bigger that, but NONE OF THEM are as slim as Q.
It is an awesome design of useful features. Today.
Posted by Montevale (31 comments )
Reply Link Flag
What else is there? This is it!!! ...today.
Everyone around me is bickering about the lack of WiFi, expensive data plans, small storage capacity...
Get real, this is not a laptop!
It is small it does email, sms, phone, mp3... and whole bunch of other stuff that can be used on a small screen comfortably.
What else is out there that is that small? Sure you can argue about some other different units with more of this or bigger that, but NONE OF THEM are as slim as Q.
It is an awesome design of useful features. Today.
Posted by Montevale (31 comments )
Reply Link Flag
 

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