Three of the nation’s four top-tier carriers announced Friday that they would launch Motorola Inc.’s new Razr2 handset in the coming weeks, apparently piling on in a “me-too” frenzy.
The triple launch, at least initially, appeared to be good news for beleaguered Motorola, which needs to revive its global market share, firm up an eroding share of its domestic market and return to profitability. It also needs to burnish its brand, tarnished by over-reliance on the Razr platform, a lack of broad 3G offerings and its financial woes.
Friday’s carrier announcements followed each other in rapid succession and underscored the intense level of competitiveness among the carriers and the speed with which they are able to respond to each other’s news. Verizon Wireless announced first thing in the morning, rapidly followed by Sprint Nextel Corp. and AT&T Mobility.
Sprint Nextel first to market
Sprint Nextel will launch first (Aug. 22) at $250 through its online and telesales channels. Verizon Wireless and AT&T Mobility both said they would launch the device in September at $300.
One analyst said that the Razr2’s features, particularly its large, high-resolution outer screen, could tempt consumers even at the $250 to $300 subsidized price cited last week by the carriers. In contrast, another analyst said that with the original Razr still leading U.S. sales at far lower price points, Motorola would have to spend prodigiously on marketing to move consumers from its current offerings to the Razr2.
With a planned European launch also pending, Motorola has secured the widest possible distribution for its latest handset model and the Razr2’s price appears designed to provide the vendor with desperately needed profit margins. Whether it will succeed, of course, is the next big question for the company.
Shoring up share
Despite its 33% dominant share of the U.S. market, Motorola’s share here slipped four points from the first quarter to the second quarter. Globally, the vendor has slumped to third place behind Nokia Corp. and Samsung Electronics Co. Ltd. The vendor’s mobile devices division fell from robust profitability only a year ago-about $800 million in the black-to about $200 million in the red last quarter.
“Great distribution is great,” said analyst Avi Greengart at Current Analysis. “Premium pricing is great, too. But those will fly only if Motorola can convince people to buy the Razr2 and if Moto is not competing against itself.”
Greengart said the carriers likely acted last week out of self-interest, rather than an attempt to revive Motorola as leverage against the field of other handset vendors.
“I find it hard to believe that three U.S. carriers would coordinate a united front for Motorola,” said analyst Avi Greengart at Current Analysis. “It’s much likelier that those announcements, one after the other, means the carriers are battling each others’ competitive advantage. I expect T-Mobile will pick it up as well.”
Greengart said that the widespread distribution had its downside. With no exclusive for any one carrier, none of the carriers is likely to spend much to promote a handset available from rivals. Motorola itself will have to get its message across, he said. The vendor could tout the device’s CrystalTalk technology, its durability, its advanced functionality-anything but the thin, clamshell style that has become ubiquitous since the original Razr launched. And the original Razr and its deeply discounted pricing will be a hurdle to the Razr2’s value proposition, he said.
“Unfortunately, the availability of $50 Razrs will cannibalize sales of the Razr2 in that $250 to $300 price range,” Greengart said. “It’s going to be tremendously difficult to move consumers up to that new price point. The real challenge with the Razr2 is marketing. They definitely have messages that could move the needle. And we should give Motorola kudos for announcing in May and delivering in late summer. They’re overcoming a heritage of production problems and shortened their launch window.”
Razr stubble
Motorola needs to restore a sense of premium value to its brand proposition, Greengart said, but it would have a better shot at that if it pulled the original Razr off the market-“a tall order,” he said.
(Recent Strategy Analytics data on the U.S. market reveals that two Razr models are among the top five best-selling handsets in the nation.)
In the view of analyst Tero Kuittinen at Avian Securities L.L.C., who had correctly predicted an impending, multi-carrier launch, modest sales of the Razr2 with such wide distribution could well lift Motorola’s volume shipments sufficiently this year to make its second-quarter results the dreaded “trough.”
“It’s obvious that the Razr2 is Motorola’s anchor model in the second half of the year,” Kuittinen said. “It has to move consumers. I think they can pull it off.”
