Motorola Razr 2 Might Not Save Motorola’s Profits

September 6, 2007 – 3:23 pm

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The original Motorola Razr was so popular it helped the company print money. The company was hoping for a repeat with the Motorola Razr 2, but analysts don’t think the new version can save the company’s profitability.

Motorola, the biggest U.S. mobile-phone maker, began selling the $250 Razr 2 last month. While the new device has a bigger screen and more storage for songs, it lacks features such as the touch screen found in Apple Inc.’s iPhone.

The Razr 2, based on the handset that analysts say accounts for a third of Motorola’s phone sales, will fail to win buyers because they can get the original for free with a service contract, said Brad Williams, who helps manage $13 billion as MTB Investment Advisors in Baltimore.

“You put it on the table next to the old Razr, and you don’t really see what you’re paying the extra $250 for,” Williams said. “You put an iPhone on the table, and everyone sees immediately it’s an iPhone.” MTB sold its stake in Motorola last quarter and holds Apple shares.

The fall in popularity of the original Razr has been one of the main contributors to Motorola’s declining revenue and profitability, which as lasted for many quarters now. Without a boost in sale from the successor, it’s doubtful the company will grow in sales anytime soon.

Further compounding the problems for the Razr 2 is the price. With Apple slashing prices on the iPod yesterday, it’s doubtful the moribund revenue figures will be reversed any time soon.

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