Don't expect Motorola ( MOT) to follow Palm's ( PALM) success. Excitement has been building as the former flip-phone star attempts to reinvent itself as a smartphone challenger. Former Qualcomm ( QCOM) executive Sanjay Jha has slashed 7,500 staff positions, targeted $1.3 billion in cost cuts from its phone unit and aligned its hardware strategy with Google's ( GOOG) Android phone software. Motorola says it will have the Android phones ready and available in the fourth quarter. It looks like Motorola plans to debut two new Android devices -- one version headed to Verizon ( VZ) and probably Sprint ( S), and another that probably will land with T-Mobile and some European telcos.
The problem, however, is that the crowded smartphone market leaves very little room for another up-from-the-ashes recovery story. The Verizon phone has been described as having a sleek industrial design akin to that of the edgy Razr, with a big touchscreen and wide slide-out Qwerty keyboard. But the cool Motorola touches might not be enough to set the phone apart from the pack of similar formats coming from Nokia ( NOK), Samsung, LG, HTC and possibly Research In Motion ( RIMM). The big differentiator in smartphones is smartness. Apple's ( AAPL) iPhone OS has won millions of fans who like its capable, stable performance. But Palm's Pre phone, designed by a former Apple engineer, aims at the iPhone's big weakness: the inability to run more than one program at a time. Nokia's and RIM's operating systems have been the keys to their success. For its part, Android has been a surprising hit for Google as it made a risky gamble on wireless. The G1 phone at T-Mobile has done well, selling more than 1 million phones with its appealing user-friendly simplicity that's almost custom-made for Facebookers and the messaging masses.
But Android lacks muscle. And here's the big problem: Motorola's decision to go with Android places the phones in the mid- to lower-priced smartphone. To make that market work, telcos will have to provide matching lower-priced calling plans. Phone companies are enjoying growth in data services sales and certainly aren't eager to cut prices at this point. Palm aimed high at design leaders Apple and RIM; meanwhile, Motorola is aiming low enough to shoot itself in the foot.