Experts Mostly Unworried by Motorolas Razr Burn

Most wireless industry watchers don't feel that Motorola's recent hiccup with its popular Razr handset line is a sign of larger issues, but experts said the company needs to keep its eye on the ball to maintain its current momentum.

Speaking to reporters in China, Motorola CEO Ed Zander said that his company has addressed the problems that led it to halt shipments of its popular Razr handsets earlier this week.

The issue, which affected models of the diminutive phone designed for use on GSM (Global System for Mobile Communications) wireless networks, reportedly caused some units to drop calls without warning.

Motorola officials downplayed the incident as a minor problem that involved only a "very limited" number of handsets and said that most of the Razrs it has shipped have not been affected by the flaw.

Nonetheless, carriers Cingular Wireless and T-Mobile were both forced to pull the device from shelves while Motorola screened for the problem in new shipments of the phones. Neither company immediately responded to requests seeking further comment on the Razr problem.

Calls to Boston-area retail locations for both companies found neither had the Razr in stock, but sales associates said they were expecting new shipments of the phone in the next several business days and indicated that demand for the model remains strong.

/zimages/4/28571.gifClick here to read more about the Razr phone.

A statement issued by Motorola on the problem said that the company expected to have the Razr "widely and readily available" across retail outlets worldwide within a matter of days. More importantly, the company reported that it does not expect any negative impact on financial results based on the production hiccup.

Most industry watchers said that the Razr issue is not likely a sign of larger problems at Motorola, but some observed that the company could ill afford the potential fallout of a major product recall. Brad Akyuz, an analyst with Current Analysis in San Diego, said that since the Razr has become the centerpiece of Motorolas handheld lineup, losing any current momentum with the product could seriously hurt the companys outlook.

Another issue that has to be considered is that the company has reported component-oriented flaws in several other GSM phones over the last several years, he said.

"Motorola has been on a great track and simply cannot afford to make any error, particularly because this isnt the first time were hearing about quality-control problems with their components," said Akyuz. "Theyve battled a reputation of being late to the market with innovative devices and the Razr changed all that, but people like carriers may look at this issue when theyre negotiating future deals with Motorola, so it cant be a good thing."

Akyuz pointed out that Motorola was forced to recall several models of GSM phones sold in the United States through Verizon Wireless, based on an issue with the handsets chip sets that caused them to have problems connecting to wireless EDGE (Enhanced Data for Global Evolution) networks. Another problem with on-board camera components forced a recall of another earlier model of a handset marketed by Verizon and T-Mobile.

"Motorolas rivals have been wondering about how they might stop the Razr; its been out for 18 months and its still in high demand, which is pretty rare," said Akyuz. "This sounds like a small issue, but theres a bigger picture to consider that could affect Motorolas vision in terms of working with carrier clients, and rivals will try to use issues like this against them."

/zimages/4/28571.gifMotorola has combined its enterprise mobility business with its networks and government operations. Click here to read more.

However, experts observed that the people buying the Razr, primarily consumers interested in the devices sleek, thin exterior and multimedia capabilities, most likely wont ever notice the hiccup. Charles Golvin, an analyst with Forrester Research in San Francisco, said that it could be troublesome for Motorola if the Razr issue turned out to be more widespread than reported, but he said the issue would likely be forgotten soon if there are no further recalls.

The analyst also observed that the situation may have been a bigger headache for Motorola if the flaw had affected Razr models designed for use on CDMA (Code Division Multiple Access) networks. Since the phone maker has shipped only limited numbers of those devices and there is some pent-up demand for such handsets, more people would have taken notice of any hiccups, he said.

"The impact is pretty minor because the people who are buying Razrs are doing so for the cool cache that the model carries and something like this wont even be on their radar," said Golvin. "The only fallout is likely a momentary loss of availability, and I dont see this as creating any sort of problems for Motorolas overall image."

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