Motorola Takes a Cut at iPhone

May 15, 2007 — -- Motorola tried to relaunch its sluggish sales Tuesday by unveiling a new, sleeker and sexier version of its once hot RAZR phone.

The new RAZR2 is 2 millimeters thinner than the old model, more durable and loaded with more features.

But with the upcoming iPhone monopolizing much of the mobile phone buzz, Motorola is going to face an uphill battle. The RAZR2 gives the company a new product on the market just as consumers are looking for a set of new features.

Motorola CEO Ed Zander told a group of journalists and analysts in New York that the company is "resetting our strategy" and putting "the wow back into some of the things we're doing."

Zander said that Tuesday's event was "just the beginning."

"We've got a lot to do," he noted.

The new RAZR2 will be available in Asia in July and is expected to be rolled out globally -- including in the United States -- by the end of the summer.

Motorola is not putting a price on the phone, which often is purchased at different rates through phone service providers. But Bill Kastritis, a product marking manager for the company, said it will be "higher priced but not out of the reach of the consumer." Asked if "out of reach" was a reference to the iPhone, Kastritis answered: "Well, you said it."

Kastritis said this phone isn't especially a competitor for the iPhone. He said it was a phone first.

So what's new? Motorola streamlined the phone. The resolution on its inside screen was doubled and the exterior display has 10 times the resolution of the original RAZR.

Users will be able to customize the menu structure to meet their own needs. Its exterior buttons send a pulse back so users know they have properly pushed the button.

The phone also features a stainless steel internal frame and scratch-resistant hardened glass exterior.

The RAZR was a huge hit when it first entered the market in 2004, revolutionizing what it meant to have a cool, stylish cell phone. But when the company quickly dropped the price of the phone and flooded the market, the RAZR lost some of its cache.

Motorola has failed to come out with a new high end phone to recapture the market's attention. It is unclear if this new version of the RAZR will be the successor phone the company needs.

"It comes at a good time," said Ryan Reith, a mobile phone researcher with IDC, a technology research firm. "They talked about stop chasing market share and going after profitability. The way to do that is with this high-end stuff."

Reith, who was at the New York event, added: "They moved away from talking about the low end stuff and the emerging markets."

Reith noted that everybody is talking about the iPhone, and said that Motorola's showing "is a matter of brand recognition that they are in this market."

Avi Greengart, principal mobile device analyst for Current Analysis, called the phone "a spectacular follow on the RZAR."

"It's very sexy in your hand. It's very fast. The most critical things though are the durability. If they can get across that message to consumers, that it is more durable, that maybe is something consumers are willing to pay for," Greengart said.

Motorola is also selling the clarity of the calls on the new phone. It has new technology that it dubbed CrystalTalk which automatically adjusts volume when there is a lot of background noise.

"It astonishes me that no one has thought to brand the voice experience," Greengart said. "We all know that the primary thing we all use a phone for is to make phone calls."

Greengart, however, said he was a bit disappointed because there is an expectation that at some point Motorola will come out with a line of high-end multimedia products to compete with the iPhone and other similar products.

"I didn't see that today. I saw stuff I saw at prior events," he said.

The vast majority of growth today is in emerging markets where a lot of phones are sold, but with low profit margins, Greengart said. Those sales need to be balanced with the high-end market which is still the fastest growing segment and where each sale nets more profit.

Greengart said the new RAZR2 is a great middle market phone and that Motorola is still missing out on "the high-end stuff."

"I think people are going to walk into stores expecting to spend $50 on a RAZR," he said, "and they're going to start messing around with the iPhone and go ohhh."