INDUSTRY SOUNDS OFF ABOUT MOTOROLA'S NEW MUSIC PHONE

The global proliferation of the first Apple-branded cell phone has begun. Merely a week after launching the ROKR over Cingular Wireless' network in the U.S., Motorola has debuted its new music phone in Australia, Germany, Hong Kong, Singapore and the U.K. and is about to splash down in Argentina, Brazil, Canada, Mexico and the Philippines.

Motorola clearly expects the ROKR to be the barnburner to follow last year's launch of the ceramic wafer-thin RAZR, the phone that is single-handedly credited with restoring Motorola's reputation in the handset biz. And it's ready just in time for Christmas.

“We predict that the ROKR is going to be a hit this holiday season,” said Motorola CEO Ed Zander at the phone's launch party in San Francisco.

But unlike the RAZR, which enjoyed critical acclaim from both industry analysts and the consumer media, the ROKR is getting panned from all sides. The general consensus is the phone is a big disappointment after the excitement of Motorola's and Apple's announcement last year. And while both Motorola and Apple have said all along they planned to keep the features of the phone basic to keep costs down (Cingular is subsidizing it for $250), a number of industry experts are questioning Apple and Motorola's commitment to executing their plans for a melded wireless and digital music world.

Ovum has pointed out that Motorola and Apple not only eschewed the opportunity to follow the sleek designs of Apple's iPod line in building the device, they didn't even bother to build a new device. The phone is, in fact, a repurposed version of the Motorola E398 2.5G candy bar phone optimized with iTunes software and 512 MB TransFlash storage card, according to Ovum's Dario Betti. The lack of 3G connectivity makes the possibility of over-the-air downloads appear unlikely, and the phone's 100-song capacity has also generated derision from all sides. A recent study by the Diffusion Group polled consumers likely to buy a music-enabled phone as to what their storage expectations would be. It found that on average, those early adopters wanted storage capacities of at least 250 songs. Those expectations rose as high as 335 songs in the 14- to 24-year-old age bracket, which is a key segments targeted by these devices.

“At 100 songs, we don't feel it holds enough,” said Dale Gilliam, director of primary research at the Diffusion Group. “Most people are going to want more than twice that amount.”

Apple appeared to be running away from the ROKR as soon as it was launched, said Andrew Cole, A.T. Kearney chief telecom analyst. The ROKR will be a tough sell for a consumer faced with much more powerful iPod options like Apple's new 1000-song Nano — and that was exactly what Apple intended, Cole said. The last thing the computer maker wants to do is cannibalize its own iPod product line.

“Apple had no choice but to make this phone,” Cole said. “It had to have a wireless strategy. Its choices were to either make iTunes work with a carrier or launch its own MVNO.”

The ROKR is basically Apple's pre-emptive move against other carriers planning their own music portals as they prepare to launch 3G music services. The music industry's distaste for Apple is well-known because Apple uses song sales as a loss-leader to sell hardware, Cole said. The music industry will be more than willing to partner with other carriers to form their own versions of iTunes where music can be sold at a premium.

In the U.S. that breakdown is following the old battle lines of the technology wars. Cingular, following GSM Europe's lead, is looking to open its network, allowing outside content onto its network. CDMA operators Sprint and Verizon Wireless, however, are keeping with their walled-garden approaches, aiming to launch their own music portals using portal-independent music phones being developed by Sony Ericsson and Samsung.

“They've so much as told us, ‘We will not let Apple insert itself into our value chain,’” Cole said.