March 10, 2006

Cingular, T-Mobile Halt Razr Sales Due to Glitch

NEW YORK -- Cingular Wireless and T-Mobile USA have temporarily stopped selling the Razr, Motorola Inc.'s flagship cell phone, due to a technical glitch that causes the phone to drop calls or shut down, the companies said on Friday.

Motorola said only a limited number of phones were affected and the problem would have no impact on its financial results. The Razr, lauded for its thin design, was first sold in late 2004 and is still a key product for Motorola.

One analyst, Ed Snyder of Charter Equity Research, said he did not expect a material impact from the problem but expressed concerns about how Motorola manages its suppliers. Another analyst said the halted sales may hurt the phone companies' market shares.

Motorola's stock was down 46 cents, or more than 2 percent, in afternoon trade on the New York Stock Exchange.

Motorola spokesman Alan Buddendeck said the faulty phones were sold to operators between January 16 and February 28, with the first of the U.S. shipments on February 1. He did not say where else the phones were sold.

Motorola is still selling new Razrs and expects availability to return to normal by next week.

"Motorola and its customers are addressing a quality issue affecting a very limited number of Razr handsets sold for GSM networks," Buddendeck said in a written statement.

GSM, the dominant cell phone technology standard in Europe, is also used in the United States by Cingular Wireless, a venture of AT&T Inc. and BellSouth Corp., and T-Mobile USA, owned by Deutsche Telekom AG.

Cingular, the No. 1 U.S. mobile service, stopped selling the phones on Monday. Spokesman Mark Siegel said it hopes to make the Razr available again as quickly as possible.

T-Mobile USA pulled all Razrs from its shelves on Wednesday and hopes to start selling the phone again by early next week, according to a spokesman.

Bear Stearns analyst Phil Cusick estimated that Cingular and T-Mobile USA derive 10 percent to 15 percent of their handset sales from the Razr. A week without the Razr may hurt their market shares for March and distract sales people dealing with return issues, Cusick said in a note to clients.

Shares of BellSouth, which agreed to be bought by AT&T on Sunday, were up 24 cents to $34.53 in afternoon trade on the NYSE. AT&T stock was up 23 cents at $27.17.