July 26, 2005

Motorola Unveils Thin Phone for E-mail Addicts

ROSEMONT, Illinois -- Motorola Inc., the world's second biggest mobile phone maker, unveiled on Monday an ultra thin mobile phone with a keyboard, aimed at people who have become addicted to Blackberry e-mail and messaging devices.

Motorola said the latest handset, dubbed the "Q," was inspired by the ultra-thin design of its popular Razr phone -- which has become a design icon and status symbol. The "Q" is slimmer than the Razr and about 50 percent thinner than top rival phones that have tiny keyboards built-in, it said.

The phone pits Motorola, which trails only Finland's Nokia in the mobile phone market, directly against Research In Motion Ltd. and Palm Inc., which make some of the most popular keyboard phones. Rim's Blackberry is viewed as the leading mobile e-mail device.

"The biggest question is whether they can chip away against the Blackberry dominance," said RBC analyst Mark Sue, adding that he was "encouraged" by the latest phone's shape.

Shares of Motorola closed up almost 3 percent and Research In Motion closed down almost 5 percent on Monday after reports that Motorola would show a Blackberry rival at an event here in Rosemont, a Chicago suburb.

"Given the success of Motorola's Razr... in the market right now, its understandable that some people are worrying about that," said Kona Shio, an analyst with research firm Conscius Capital Partners.

Motorola's "Q" is based on software from Microsoft Corp. and can support e-mail from a variety of third party applications, including Microsoft's, Motorola said. It expects the device to go on sale in the first quarter of 2006.

Microsoft Chief Executive Steve Ballmer, who joined the event via a video link, said he believed the companies would sell "a heck of a lot" of the new phones.

Chief Executive Ed Zander said the "Q" was one of many upcoming products that would help Motorola beat its rivals.

"I don't think there's another company that can put together a product line like that," Zander said.

He said Motorola's long-awaited music phone that can play and store music from Apple Computer Inc.'s iTunes music service would sell at major operators by the end of the current quarter. The phone is expected to include elements of the Razr's design and sell under the brand name ROKR.

Motorola has delayed showing off its iTunes phone amid rumors it was unable to convince operators to sell the phones. Cingular Wireless, a venture of SBC Communications and BellSouth, has had talks about selling the iTunes phone.

Cingular said on Monday it would sell sunglasses from Oakley Inc. that include a short-range wireless chip from Motorola. The chip connect wirelessly to the wearer's phone, letting the user answer calls by tapping their shades.

Motorola also said on Monday it would build network gear based on WiMax, a technology being developed to cover entire cities with high-speed wireless Internet access to home computers and eventually mobile phones.

Motorola, which said recently it would work with No. 3 U.S. wireless operator Sprint on the development of WiMax, said it would have products based on WiMax around the second quarter next year. It plans to increase the amount of research and development resources devoted to the technology, it said.

WiMax, which is expected to have a much wider reach than WiFi, a technology that is in most new laptops and provides wireless Internet access in small venues such as coffee shops. Motorola also laid out plans for a phone that could swap from a wide-area cellular network to WiFi in a consumer's home.

Zander said he expected forthcoming wireless broadband technologies such as WiMax to eventually merge with other high-speed wireless technologies that operators around the world were building into their networks.

The company said it expected in the first quarter of 2006 to sell a U.S. Razr phone based on a high-speed technology known as EV-DO that Verizon Wireless and Sprint are building into their networks. One executive said the phones could go on the market as early as the fourth-quarter.

Motorola also showed a home video phone that can play video messages as an alternative to traditional voice mail messages. The phone will go on sale later this summer.

Motorola plans to hold its annual analyst day on Tuesday. Its shares closed up 54 cents at $20.54 on the New York Stock Exchange. Rim's shares closed down $3.38 at $68 on Nasdaq.

(Additional reporting by Jeffrey Hodgson in Toronto)


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