Motorola Shares Fall on Report of Delays

Shares in beleaguered Motorola Inc. (MOT) sank more than 5 percent Friday after a report that delays will keep the company's first camera-phone from being delivered to U.S. consumers in time for the holiday season.

The setback, reported by The Wall Street Journal, comes with the company already in turmoil over a pending change in leadership and losing market share in North America to its cell-phone rivals, primarily Nokia (NOK) and Samsung.

Christopher Galvin resigned as chairman and CEO on Sept. 19, citing differences with the board of directors over the next steps in Motorola's stalled turnaround.

Motorola's stock fell 64 cents to $11.89 after initially tumbling as much as 6 percent in heavy morning activity on the New York Stock Exchange, although they remained above the $11.09 level where they were trading before Galvin quit.

Camera phones are one of the hottest new consumer electronics products, and Motorola's competitors are months ahead of the Schaumburg, Ill.-based company in offering them. About 25 million camera phones were shipped worldwide in the first half of 2003, and 65 million — some 13 percent of the global cell-phone market — are projected to be sold this year, according to research firm Strategy Analytics.

Motorola told analysts in July that both of the color-screen camera phones that are to be offered through Verizon Wireless would be available in the fourth quarter.

But the Journal, citing unidentified sources, said Motorola will miss the whole holiday shopping season for camera-phone sales to Verizon, the nation's No. 1 wireless carrier, because of delays in deliveries for testing. The newspaper also said Cingular Wireless, the runner-up to Verizon, won't be able to sell a new Motorola camera phone until at least mid-December, making it too late for a major marketing effort.

AT&T Wireless Services Inc. (AWE) also is likely to see delays in receiving a Motorola camera phone it had expected to sell in the fourth quarter, according to the report.

Motorola representatives did not immediately return a telephone call Friday. Spokesman Alan Buddendeck told the Journal the company would launch at least one camera phone in the United States during the holiday season, but he declined to provide specifics.

"When you're doing any new model of phone, or any new technology or features, you run a good chance of encountering challenges," the spokesman was quoted as saying. "You've got to resolve those before you bring it out to market."

Jim Gerace, a Verizon Wireless spokesman, said his company was disappointed that Motorola won't have a camera phone available for it to sell during the busy holiday selling season.

Motorola was criticized for also having been late to market with other important innovations and changes dating to the 1990s, including the switch from analog to digital and consumers' preference for cheaper cell phones.

Motorola has selected the recruitment firm Spencer Stuart to lead the search for a new CEO. President and chief operating Mike Zafirovski is considering the leading internal candidate.