Anybody who's been impressed by the Razr's edge might find it a double-edged sword at the moment. Some bad news about Motorola's (NYSE:MOT) most popular product hit the wires last week. Might a technical glitch in a smattering of its popular Razr mobile phones give a lot of consumers -- and investors -- a reason to hang up on the handset provider?
Wireless carriers Cingular -- a joint venture between AT&T (NYSE:T) and BellSouth (NYSE:BLS) -- and Deutsche-Telekom's (NYSE:DT) T-Mobile both said they will suspend sales of Motorola's Razr phone because of a glitch that results in randomly dropped calls and unbidden shutdowns. (However, Verizon (NYSE:VZ) Wireless is still selling the Razr, since its network uses a different technology that is not affected.)
While Motorola has said that just a few of its Razr phones are impacted by the glitch, that doesn't change the halt that Cingular and T-Mobile have put on sales of the ultra-thin gadget. It's just a temporary suspension while the bad batches of the handsets are culled out of the supply, but of course investors should cringe at the idea of any lost sales.
Even if it's a more temporary problem than some headlines seem to note, negative buzz about the phone could cause prospective customers to pause before snapping up a Razr. Warning headlines like PC World's "Whoa, Don't Buy That Sexy Razr Phone Just Yet" offer up a good example.
Last quarter, the Razr's edge was evident. Motorola's earnings illustrated plenty of positive impacts from the Razr, which Fool contributor Tom Taulli compared to Apple's (NASDAQ:AAPL) iPod, calling it Motorola's own killer product. A good deal of Motorola's fourth-quarter growth was due to the Razr's popularity -- demand for the phones doubled to 13 million in the quarter. It's not hard to see that the Razr's name recognition and pop-culture appeal had archrival Nokia (NYSE:NOK) beat, for the time being anyway.
Motorola did say that it is working with wireless carriers in order to make sure that customers can easily exchange any defective Razrs, and a new, glitch-free supply of the phones should be available from Cingular and T-Mobile again by March 17 -- not such a long wait at all, really. As long as the glitches are brief and fixed quickly, the biggest concern is a potential blow to the prestige inherent in the Razr phone's name. That's what investors should be most concerned about at the moment.
Catch up with recent news about Motorola:
- Motorola might be losing some mojo, judging by last quarter's earnings.
- Here's the Foolish Forecast for the fourth quarter.
- Some think Motorola's making sense.
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Alyce Lomax does not own shares of any of the companies mentioned.
