Design Duds Dent Motorola

Motorola (MOT) fans relish a massive share buyback but are discouraged by the company's fading prospects.

If the company's yearlong stumble weren't bad enough already, signs of new missteps are making recovery odds look even longer. Apparently Motorola is having difficulties with one of its newest crop of phones, and that could spell critical delays.

Shares of the Schaumburg, Ill., wireless giant fell 6% after the company slashed more than a $1 billion off its first-quarter sales estimates Wednesday. Replacing its finance chief and pumping $3 billion more into stock repurchases helped buffer the full impact of the company's fourth consecutive quarterly disappointment.

Bulls emphasize that Motorola as a diverse technology company, with strong products in cable set-top boxes and networking gear including emergency communications systems. And, as the feeling goes, with CEO Ed Zander's latest executive shuffle the mobile phone business will eventually get whipped into shape with some organizational changes and cost cuts.

But some investors and industry observers are skeptical.

"Zander isn't a cell phone guy, he's a turnaround guy," says one buy-side analyst who is short the stock. "If you are Motorola, being a product design company is your core asset."

As the tremendous rise and fall of the Razr demonstrated, a breakthrough design can translate to huge sales. And though Razr's popularity has collapsed, Motorola had high hopes for the ultrathin Scpl phones that promise to spread the winning Razr-inspired design to new models and new markets.