Motorola's Google Phone: a Comeback?

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SAN FRANCISCO (Reuters) – Motorola unveiled on Thursday the first of many cellphones to be developed in partnership with Google, but analysts questioned if it could revive the once-dominant handset maker’s fortunes.

Wall Street sees the phones as Motorola’s last big hope to regain the market share lost to rivals like Apple Inc, Nokia and Samsung.

Analysts were unimpressed by the design but hoped a focus on integrating social networking sites from Facebook to Twitter might help prop up sales.

Shares of Motorola rose around 1.5 percent at $7.97, barely more than the rise in the overall market and off their earlier high of $8.15 before the phone was shown. In contrast, when Palm Inc unveiled the Pre phone at the Consumer Electronics Show in Las Vegas in January, its stock rose 35 percent.

Motorola’s stock had risen over 10 percent in the past month in anticipation of the new phone.

“This is just the first salvo in the whole discussion about where they are going to place, but it sounds like they’ve done a good job here,” said Ed Snyder, an analyst with Charter Equity Research. “It’s nothing really to write home about from a physical aspect, but they don’t really need to knock it out of the park to do much better.”

The phone, which uses Google’s Android software, has a slide-out mini-keyboard and a five megapixel camera.

The devices will be called Cliq in the United States, where it goes on sale at Deutsche Telekom AG’s T-Mobile USA in the fourth quarter, and branded Dext in the rest of the world. France Telecom’s Orange plans to sell the phone in Britain and France; Telefonica in Spain; and America Movil in Latin America.

The phone will hit stores ahead of Thanksgiving, the start of the crucial holiday season, with pricing not yet available. Another Android phone will be launched before the end of the year, Motorola said.

“It’s not really a threat to iPhone because it doesn’t look distinctive enough,” said Macquarie Research’s Phil Cusick. “It’s pulling back here because really what they launched was essentially in-line with what we’d been expecting.”

NETWORKING HARD

Motorola’s last big cellphone — the Razr — launched nearly five years ago. Its ultra-thin design spurred copycats.

Since co-Chief Executive Sanjay Jha took the helm in August 2008, investors have hoped the doctor of engineering could turn around Motorola with his aim of scrapping existing phone roll-outs to divert resources into Google Android devices.

“We’re committed to the product, but we have to make it matter in the market place. That will govern our financials,” Jha told Reuters after unveiling the device.

Motorola is banking on the current craze for smartphones, one of the hottest segments of the tech market. Charter’s Snyder expects sales of about 240 million smartphones, or about 20 percent of a 1.2 billion global phone market, in 2010.

Jha has said the new phones command higher margins as people are willing to pay more for smartphones.

“These phones will substitute for very unprofitable phones that Motorola is selling,” Snyder said. “They will probably cannibalize some of Motorola’s own phone sales and probably not show up as huge market share gains initially.”

Some liked Motorola’s efforts to simplify managing contacts and communications with online social sites.

“That’s the limitation of your iPhone: you move from one page to another,” said Deutsche Bank’s Brian Moddoff. “This is a good starting point.

The centerpiece of the phones is MOTOBLUR software, which delivers updates from friends on multiple social sites. Contacts, messages and log-in information will be backed up on secure servers, so users can remotely erase the data — if the phone is lost — or use it to update a new phone.

But “it’s got to do something more, because that alone is not going to make people go out and rush to buy this phone,” said ABI Research’s Kevin Burden.