AT&T Opted Out of Motorola's Android Plan

Updated with a response from AT&T

SCHAUMBURG, Ill. (TheStreet) -- Motorola's (MOT Quote) one last chance has one fewer partner to help make it happen.

AT&T (T Quote) cancelled plans to carry Google (GOOG Quote) Android-powered phones later this year, says MKM Partners analyst Tero Kuittinen, who initiated coverage on Motorola with a sell rating Thursday.

Motorola hoped to convert some Microsoft (MOT Quote) Windows Mobile phones to the Android operating system, but the devices were deemed too out of date for AT&T's tastes, according to sources close to the company and in the retail channel, says Kuittinen.

AT&T declined to comment for this story, and Motorola was not immediately available for comment.

With Motorola's mobile phone business hanging on the success of new Google Android phones, the company could have used a big telco like AT&T to push its phones at some of its 70 million customers.

Phone chief Sanjay Jha, the architect of Motorola's bold Android strategy, told analysts on an earnings call last month that the company would have two Android phones available by the holidays and that it had signed on two telcos as partners.

It is widely expected that Motorola will announce at a Sept. 10 conference that Deutsche Telekom's (DT Quote) T-Mobile and Verizon (VZ Quote) are the two carriers, though there has been some confusion about Verizon's role, since the company has not been asked to participate in the event.

Ideally, Motorola would have had several phones available this year at all the major wireless shops to help speed the company's turnaround. But as it stands, Motorola's recovery effort is a little shorthanded.

"T-Mobile, with its shrinking new mobile subscriber numbers, is nowhere near the distribution partner AT&T would have been," says Kuittinen.

Motorola expects to have its Android phones available at international telcos and new models next year, but it's the first impressions that matter most when big expectations are on the line.

Observers expect Verizon to have a very promising full-featured Motorola Android phone available in October. If the phone is delayed until November or later, it will be a major blemish on Motorola and probably a boost for rivals like Apple (AAPL Quote), Palm (PALM Quote) and Research In Motion (RIMM Quote).

From an investor's standpoint, Motorola can't afford many mistakes.

Written by Scott Moritz in New York.