ITunes Phone Delays Contrast Corporate Attitudes

Now you see it, now you don't. Industry analysts and consumers have expected a sneak peek at Motorola's (NYSE: MOT) highly anticipated iTunes-compatible cell phone for a few months now, but each time they think the unveiling will happen, they've been let down.

A week after the most recent disappointment at the CeBIT tech conference in Germany, Motorola today placed the blame on Apple (Nasdaq: AAPL) and downplayed questions suggesting the delay had been due to the company's inability to finalize details of its arrangements with service operators.

Ron Garriques, president of Motorola's mobile phone division, told attendees at the CTIA Wireless 2005 trade show in New Orleans: "The first thing you're seeing here is a merger of two different industries with different ideas of launching products. [Apple CEO] Steve [Job]'s perspective is that you launch a product on Sunday and sell it on Monday."

Different Strokes

According to Jupiter Research senior analyst Joe Wilcox, those differences point more to the specific way Apple does business than to broad contrasts between the cell phone and computer industries.

"It's not unusual for a new cell phone to be announced long before it ships because of the need for FCC approval and other requirements," he told MacNewsWorld. "Apple does announce some products with a time lag, but it's usually short. Many other computer and technology companies, however, often talk about products long in advance."

When asked if Motorola's peculiar behavior with its iTunes phone indicates that Apple is pushing its penchant for secrecy on its business partner, Wilcox responded: "That would appear to be the case. From a marketing standpoint, Apple's technique generates buzz and anticipation."

Intertwined Relationships

Joe Laszlo, a senior analyst who covers the wireless broadband markets for Jupiter, explained to MacNewsWorld that Motorola simply operates under different constraints from Apple. "Apple isn't beholden to anybody other than the retail channel," he said, "but Motorola can't do anything on their own. They're beholden to the mobile operators.

"Mobile operators may be skeptical about what's in it for them [with the iTunes phone]," Laszlo continued. "They want more data and voice traffic on their networks, but you put music on this phone through a computer, not over the network. The operators may be wondering 'Why would I want that?' It's short-sighted, but I can see them thinking that way."

Motorola could simply bypass the mobile operators and sell the phone directly to consumers through retail channels, but Laszlo pointed out that most cell phone sales are heavily subsidized by carriers in the U.S. In contrast to the rest of the world, especially Europe and Japan, American consumers don't care as much about a device that can do everything, Laszlo and Wilcox both noted.

"Our data shows that most U.S. consumers are willing to carry multiple devices," Wilcox said. "And they often take the free cell phone over the modestly priced one with extra features. I think uptake [of the iTunes phone] will be minimal."

In the Early Stages

Laszlo said the iTunes phone is more of an "interesting sideline" right now. "We're still in the early stages of this," he said. "A couple years down the road, consumers may want converged devices, and Apple could take this experience and launch its own device."

But is Apple looking long-term at selling songs from the iTunes Music Store over cell phone networks? Laszlo doesn't think so. "That would put them at cross-purposes with the operators, who are betting the farm on content delivery as they build out their 3G networks," he said. "Apple's long-term goal is to sell more devices."

He concluded: "If operators can monetize content delivery and Apple can build devices for that content, both sides win."

Motorola's release plans for iTunes-capable phones are sketchy at the moment, but Garriques has been quoted as saying that two are on tap for this year, one in the first half and one in the second. The E790 model had been previously scheduled for its unveil at CeBIT last week. Motorola's ROKR had been on deck for a sneak peek later this month, but those plans are on hold as well.

According to Motorola, several more iTunes phones are in development, including models that can store up to eight hours of music.

Representatives for Apple and Motorola were unavailable for comment.