Product delays, price cut to hurt Motorola

Motorola Mobility warned that its third-quarter profit would miss expectations due to a long delay of a key smartphone launch and a tablet computer price cut, sending its shares down 4 per cent. Chief Executive Sanjay Jha said Motorola's Bionic, a high-speed device for Verizon Wireless, would be delayed until September, which was later than analysts had expected for the device whose launch had already been delayed to the summer from its original target for a second quarter launch. The delay, which also involves a Motorola tablet computer, will put Motorola under ever more pressure to compete with Apple, which is expected to launch a new iPhone this fall at Verizon Wireless. "It would have been nice if Motorola had a clear window prior to the release of the new iPhone," said CL King analyst Lawrence Harris. Motorola had announced the product on January 5 at the consumer electronics show. "It's highly unusual to have a product delayed this long. They really had to go back to the drawing board in this," said Harris, who noted that many people on Wall Street had hoped for an August launch of the phone. Article continues below A high-speed version of Motorola's Xoom tablet, also announced in January, will also be delayed until September, Motorola said. It had also originally slated that product launch for the second quarter. Gross profit margins will also be worse than expected this quarter, because Motorola was forced to cut the price of its first version of Xoom to compete with rivals such as Apple's iPad and Samsung Electronics's Galaxy Tab. Premium Motorola cut the price of Xoom to $499 (Dh1,831) from $799 (Dh2,932) at Verizon Wireless on July 25 to compete with iPad and tablets like Galaxy as consumers weren't willing to pay a premium for the Motorola device, which like Galaxy is based on Android software from Google. It launched Xoom at Verizon on February 24. The company gave a third-quarter earnings target ranging from break-even to 10 cents per share, excluding unusual items, compared with analyst expectations for 24 cents a share, according to Thomson Reuters I/B/E/S. "It's all lining up to be a weak quarter that's going to ripple though to the end of the year," said Charter Equity Research analyst Ed Snyder.