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Motorola's Euro Q

Motorola Inc. (NYSE: MOT) is likely to launch a 3G UMTS version of its Q smartphone at the 3GSM conference in Barcelona next week. This could help open up new markets for the device, which has so far only been available as a CDMA device that has seen modest sales in the U.S.

Analysts are predicting that Motorola could make its Q move in sunny Spain. "We still expect the UMTS Q to be launched as early as the 3GSM show in Barcelona but definitely not later than the end of the [first quarter, 2007]," writes Citigroup analyst Daryl Armstrong in a research note. "The total addressable market for this product is much bigger than the existing EV-DO version." Analyst Jack Gold at J. Gold Associates says the rumor is that Motorola will have a shiny new Q in Barcelona. "They definitely need a 'kick' for Q sales, which have been meager," he tells Unstrung. "A UMTS device would at least make them competitive in the marketplace, and European distribution is something they definitely need and have not done well at in the past." The Q initially launched with Verizon Wireless in May of last year. (See Moto's Q Pulls Up to the Curb.) Sprint Corp. (NYSE: S) followed up with its version of the Q this January. Even as the device debuted in the U.S., however, analysts were calling for a GSM-based version if Motorola was to meet its ambitious sales targets. Analysts have said that sales of the Q have been disappointing so far, with volumes not exceeding 200,000 a month, according to Citigroup. (See Moto Queues Up With Q.)

Pricing pressure is a central issue for all the major handset makers this year, but especially for Motorola as the industry closely watches its average selling prices and margins after the firm's disappointing fourth quarter.

"The company does not have a lot of flexibility with the initial pricing of this new product given the sharp downward price curve they took with the initial CDMA product," notes Citigroup's Armstrong. "In roughly three quarters the product has fallen from a wholesale price of $350 to $150."

He doesn't expect that the company will be able to demand much of a premium on the UMTS device because of the falling price of the CDMA version.

— Dan Jones, Site Editor, Unstrung

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