U.S. Phone Carriers Could Give Razr2 an Edge

In a highly unusual development, all top five U.S. mobile operators have picked up Motorola's (MOT - commentary - Cramer's Take) Razr2 for their late August/early September launch frame. Such wide U.S. carrier support this autumn could signal a third-quarter revenue turnaround for Motorola's beleaguered phone unit, as I speculated here.

Sympathy for a Reason

Motorola has always been highly dependent on its North American strength; its U.S. market share soared above 40% in 2006 on the back of the Razr phone price cuts. But Motorola's U.S. share plunged to around 33% in the second quarter as U.S. carriers discontinued several disappointing Razr spinoff models; AT&T (T - commentary - Cramer's Take), for example, stopped selling the Pebl a few months ago.

Despite the profoundly disappointing sales performance of last winter's Razr spinoff phones, American operators are now conspicuously supportive of Motorola. Interestingly, there is no sign of support for the new flagship phones of Nokia (NOK - commentary - Cramer's Take), Samsung and Sony Ericsson this autumn in the U.S.

Both Nokia and Sony Ericsson have had troubled relationships with U.S. operators over the past five years -- neither focuses on CDMA phones, and that leaves Verizon (VZ - commentary - Cramer's Take), Sprint (S - commentary - Cramer's Take) and Alltel (AT - commentary - Cramer's Take) in the cold. But both Nokia and Sony Ericsson have also fought with AT&T and T-Mobile, which tend to have long lists of tedious customization demands.

Meanwhile, Motorola has development teams attuned to the standardization and software quirks of U.S. operators -- that's why carriers from Verizon to T-Mobile want to ensure that Motorola stays strong.

Over the past six months, Verizon in particular has swung dangerously close to being dependent on Korean vendors Samsung and LG. AT&T has not had much success with the new Nokia models -- the N-75 has been a particular disappointment. Sony Ericsson has not been able to gain traction in the U.S. GSM market -- it's unclear whether this is a tactical decision to focus on Asia and Europe or whether there has been trouble in tailoring the Walkman range to AT&T and T-Mobile specifications.

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Tero Kuittinen is managing director and senior analyst for Avian Securities, a brokerage firm specializing in technology companies. Although Kuittinen is an employee of Avian Securities the statements above are being made in Kuittinen's personal capacity and are in no way are the statements of Avian Securities, nor attributable to the company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kuittinen appreciates your feedback; click here to send an email.