By Julie Jargon
CHICAGO—Motorola Inc. cell phone chief Ron Garriques promised investors in May that the company’s new Q smart phone would follow the same trajectory as its smash hit Razr cell phone, selling 750,000 units in the first 90 days and 5 million in the first nine months.
But early returns suggest that his forecast was optimistic, and that Motorola missed a chance to connect with the fast-growing smart phone market before rivals piled in with a slew of new offerings. Motorola sold 150,000 Qs in the second quarter, amid complaints about its high price, clunky software and tendency to freeze up.
“I went through three of them and had problems with each. I would go to make a call, and it would say ‘dialing’ and stay there forever,” says Tracy King, a lease manager at a Ford dealership in Detroit.
A Motorola spokesman calls the complaints “isolated” and says “we’re getting good feedback on the Q.”
But Sam Barhoumeh, manager of Presidential Wireless in Chicago, which sells a variety of smart phones, says customers returned about 10 percent of the Qs his store sold in the first month, a return rate he considers high.
“It left a bad taste in people’s mouths,” Barhoumeh says.
Bad buzz on the Q comes just as competitors unleash a fusillade of new smart phones. Rivals, from industry leader Research in Motion Ltd., maker of the BlackBerry, to longtime Motorola nemesis Nokia Corp. of Finland, are angling for smart phone sales that might have been Motorola’s.
“Basically, they blew their big opportunity,” says Todd Kort, an analyst at Connecticut-based research firm Gartner Inc. “Motorola did a lot of advertising for the Q this summer, and it wasn’t ready for prime time.”
A strong Q debut could have given Moto another smash hit at a time when the Razr’s growth is slowing. American Technology Research Inc. analyst Albert Lin estimates Razr shipments grew 4.7 percent in the third quarter, down from 15.5 percent in the second. Gartner predicts sales of smart phones, which offer such features as e-mail and Web connections in addition to phone service, will grow 66 percent this year, compared with 17 percent for regular cell phones.
That’s not the only reason smart phones matter.
“So many of the high-end features that become mainstream start out in the high-end phone market. If you’re not successful as a smart phone maker, it’s hard to be a successful mainstream phone maker,” Lin said.
The Motorola spokesman says smart phones are “important as a new and emerging market,” but he won’t provide up-to-date sales figures or say if the company expects Q sales to hit Garriques’ lofty target. Motorola disclosed Q sales during its second-quarter earnings call with analysts, but didn’t do so on its third-quarter call last week.
Motorola figured the sleek Q phone, which echoes the design of its wildly popular Razr, would score style points over the relatively drab BlackBerry. But functionality trumped form with customers who found the Q’s software less nimble than the BlackBerry’s.
Compounding the marketing challenge was Motorola’s agreement to market the Q exclusively through Verizon Wireless until the end of the year. Verizon Wireless charges $80 for a 450-minute monthly service plan on the Q. Competing carrier T-Mobile USA Inc., meanwhile, offers 600 minutes per month on the popular new Pearl smart phone from BlackBerry for just $50. Verizon Wireless introduced the Q for $200, but recently cut the price to $100.
A Verizon Wireless spokeswoman says the company has received no complaints about the monthly service charge for the Q.
Pricing and distribution are likely to improve for the Q next year when it goes on sale through Sprint Nextel Corp. Motorola also must fix the glitches and roll out a Q compatible with GSM networks, a more widespread technology than the system used by Verizon Wireless and Sprint Nextel.
But the Q’s ultimate success may depend on making it more like a BlackBerry, which customers prize for its e-mail technology. Nokia licensed BlackBerry technology for its new E62 smart phone. Moto’s Garriques said in June that the Schaumburg company was in negotiations with Research in Motion for a similar deal, but so far, no agreement has been struck.
Julie Jargon is a reporter with Crain’s Chicago Business, a sister publication of RCR Wireless News. Both publications are owned by Crain Communications Inc.
