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Motorola kills launch of new camera phone

Motorola, the world’s second-largest cell phone maker behind Finland’s Nokia , said the V295 phone was not needed and demand would be met in China by two other camera models it already offers, the A760 and E365.

“We killed the program,” Motorola spokesman Alan Buddendeck told Reuters. “Any company, you make strategic decisions about how you’re going to manage the products you bring to market.”

Camera phones — cell phones with integrated digital cameras that consumers can use to snap and send pictures to friends — are the hottest part of the global handset market. However, Motorola has had delays in rolling out some models.

Some analysts rejected the company’s explanation, saying the new phone went through costly research and development, and quality testing. They said it was more likely a technical or competitive issue that killed the launch.

“It doesn’t make a lick of sense because it’s an expensive way of planning your product line,” Charter Equity Research analyst Edward Snyder said of the decision to kill the product weeks before its scheduled launch. “These decisions are normally made on the drawing board before any investment in product.”

Snyder has a “buy” rating on the stock and does not own shares.

Buddendeck declined to say when the V295 decision was made. Its introduction had been scheduled for the fourth quarter and was due to be made by Taiwanese contract manufacturer BenQ Corp.

QUESTIONS RAISED

Yankee Group analyst John Jackson said cell phone models get canceled all the time, including by Nokia, but Motorola’s action has attracted attention given its track record of late product roll-outs.

“Their credibility is questionable because they’ve failed to execute on a number of fronts, so when they do cancel (a product) for legitimate reasons it looks questionable,” he said.

The decision to kill the V295 makes sense, however, because the mid-tier phone echoed another offering, Jackson said. Motorola already offers a high-end model in China and last week launched a low-cost camera phone for Asia and Europe.

Motorola, based in the Chicago suburb of Schaumburg, Illinois, previously said it planned to launch eight new camera phones during the fourth quarter.

Jane Zweig, chief executive of The Shosteck Group, a Washington-based wireless consulting firm, wondered whether quality problems derailed the V295 or Motorola simply wanted to focus on models it builds itself. Buddendeck said the company does not publicly discuss quality issues with suppliers.

Sales of camera phones globally are exploding. They are expected to hit almost 430 million, or 73 percent of the total, in 2007, compared with about 28 million, or 6.5 percent, last year, according to research firm the Yankee Group.

However, in China, where Motorola is the market leader but faces brutal local competition, camera phones are low volume products and consumers still mostly buy low-cost voice phones, Jackson said.

Motorola has struggled with the roll-out of some camera phones. In September, two large customers — Verizon Wireless  and Cingular Wireless — reported delays in receiving camera phones from Motorola in time for the critical holiday selling season.

Another customer, Hong Kong-based conglomerate Hutchison Whampoa Ltd. , owned by Asia’s richest tycoon Li Ka-shing, last week pushed back its break-even target for its telecom business due to delays in handset deliveries from several suppliers, including Motorola.   

Source: Reuters

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