March 15, 2006

Razr availability through Cingular Wireless and T-Mobile USA may be unpredictable until the end of March, according to equity research firm Bear Stearns.

That’s when the firm expects Motorola to fix and return Razr batches that were shipped in February but pulled from shelves last week due to a component glitch that mistakenly cut off users’ connections.

Cingular and T-Mobile USA still list the handset as “temporarily out of stock” on their Web sites. Razrs running on CDMA networks were not affected by the component glitch, sparing Verizon Wireless and Alltel Corp. of the troubles.

Industry observers are watching how well Motorola can overcome the hiccup in its delivery of the Razr, which has brought a renewed sheen to Motorola’s reputation and, not incidentally, sold more than 14 million units since its debut 18 months ago.

Last week, a spokesperson for T-Mobile USA said he expected the issue to be resolved by today. Brad Akyuz, an analyst for Current Analysis, last week discounted any impacts on Motorola if it could resolve the issue within a week or ten days.

The end of March would mark more than three weeks since the handset vendor informed Cingular and T-Mobile USA of the problem.

An analysis of the impact on the two domestic carriers filed yesterday by Phil Cusick of Bear Stearns, which trades in Motorola stock for its clients, suggested that Cingular would be more affected by the unpredictable stream of handsets reaching its retail outlets because the glitch had affected customers using the 850 MHz band rather than 1900 MHz band used often by T-Mobile USA customers.

Cingular’s Web site continued to list all three of its colors of Razr (black, silver and pink) as “temporarily out of stock.”

T-Mobile USA’s site listed its two colors of Razr (silver and magenta) as “coming soon—temporarily unavailable.” It listed Motorola’s v188, v360 and Pebl handsets more prominently than the Razr.

Cingular spokesman Clay Owen would not comment on his carrier’s estimate of possible lost sales.

However, it appears some retail locations are beginning to sell Razrs again.

According to spot checks of New York-area Cingular retail stores by CIBC World Markets’ wireless technology analyst Ittai Kidron, the stores had returned all Razr inventories last week, an average of 20-25 units per store.

The stores are now being resupplied slowly, perhaps four or five per day, which sell out the same day.

Customers seeking a Razr after stock was depleted were issued Motorola’s V557 as a temporary replacement. Kidron predicted, in contrast to Bear Stearns’ Cusick, that shortages would be alleviated by this weekend.

Kidron concluded: “While the Razr issues have clearly weighed investors’ sentiment, we believe the financial impact on Motorola is minimal, if any.”

Kidron continued to characterize Motorola shares as “cheap” and “attractive” before “more market share and margin gains are visible.”

Source: RCR