Motorola hopes to cut losses with Razr2

Motorola announced a slimmed-down Razr2 cell phone in an effort to reverse its sliding sales figures.

Motorola announced the Razr2 mobile phone and five other mobile devices on Tuesday with hopes the products will turn around the company's slumping sales and defend its turf from Apple's iPhone.

The Razr2 will reach stores in July, shortly after Apple plans to ship its iPhone to US customers in late June. Motorola predicts the phone will fare well because its design is 2 millimeters slimmer than the current Razr and has features like real-time wireless video sharing, enough memory to store 1,000 digital songs and full Web browsing and e-mail access, CEO Ed Zander said in a statement.

Although the Razr appeals to business users, the phone has not sold well enough to rescue Motorola from stumbling in recent quarters. Motorola cut 3,500 jobs in January, and in March Zander named a new chief operating officer and announced the resignation of the chief financial officer. In April, the company reported a loss of US$181 million for the first quarter, down from its profit of US$686 million in the same period a year earlier.

To reach a more users, Motorola decided to build the Razr2 in three versions to cover the main wireless telephony standards, GSM (Global System for Mobile Communications), 3G HSDPA (High Speed Downlink Packet Access) and EVDO (Evolution-Data Optimized) CDMA (Code Division Multiple Access).

That move could help the Razr2 hold its share of the high-end handset market, one analyst said, because the iPhone will launch with only EDGE (Enhanced Data Rates for GSM Evolution).

"I think this is going to be an impetus to get Motorola back on an uptick, because they didn't do well this quarter," said Will Strauss, an analyst with Forward Concepts. "Motorola needs a winner. They've pretty much tapped out their original Razr, with prices coming down from the hundreds of dollars to 30 bucks now. The prices are so low, it's almost a break-even device."

Motorola also moved to rescue its mass-market sales on Tuesday. The company upgraded its W-Series and Motofone, expecting to launch those entry-level cell phones in the fourth quarter in an effort to reinforce its bulk sales volume. Even though the profit margins are far slimmer on those sub-US$100 phones than the Razr2, the strategy is important for allowing Motorola to protect its market share, retain bragging rights for advertising and keep its manufacturing efficiencies, Strauss said.

Together, launching devices for the high-end and low-end market segments could lead Motorola to increased sales in a period when the entire cellular market is expected to rebound with a strong second half of 2007, after drifting with flat sales in the past two quarters, he said.

Motorola also updated the rest of its handset line, announcing plans for a new Moto Q 9, Moto Z8 and Rokr Z6, all set to start shipping in Europe and Asia by June.

The Moto Q 9 will hit store shelves in Italy this week, with its HSDPA/UMTS network bringing the Moto Q line to all three main standards. The device has a full QWERTY keypad and uses Microsoft's Windows Mobile 6.0 OS. The Moto Z8 is a slider-type handset offering wireless digital song downloads, a video camera, mobile television and up to 32G bytes of memory for storing movies and music. The Rokr Z6 is a handheld MP3 music player and cell phone.

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Ben Ames

IDG News Service
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