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Analysts: Motorola To Enter Cordless Phone Market, Will Produce in U.S.

August 26, 1991

CHICAGO (AP) _ Motorola Inc. likely will enter the consumer cordless telephone business by year’s end as a prelude to advancing into the market for a new - and more lucrative - generation of mobile phones, analysts said Monday.

The move would put Motorola in direct competition with industry leader American Telephone & Telegraph Co., and would make Motorola the first company to manufacture cordless phones in the United States.

Sue Schmidt, a Motorola spokeswoman at the company’s headquarters in suburban Schaumburg, declined to comment on the company’s plans.

But Motorola filed documents last month with the Federal Communications Commission detailing the development of two versions of cordless phones. And Motorola has shown a major Midwest-based retailer a cordless phone that the company hopes to market soon, said a spokesman for the retailer, who asked that his company’s name not be used.

″AT&T is clearly interested in getting into the cellular telephone market, where Motorola is the industry leader,″ said Drew Peck, an analyst with Donaldson, Lufkin & Jenrette Securities Corp. in New York. ″So it’s not surprising that Motorola would try to get into the cordless telephone market; it’s a little quid pro quo.″

Motorola probably will announce the move within a month, and likely has all the equipment in place for mass-marketing the new phones, Peck said.

The new cordless phones will be similar in design to Motorola’s successful MicroTac cellular phone, a pocket-sized unit with a fold-down mouthpiece, said Casey Dworkin, an analyst with Personal Technology Research in Waltham, Mass.

Unlike cellular phones, cordless phones only work when they are near the base station that comes with them. The base station is conneced to the telephone network through a standard phone outlet.

In the FCC filing, Motorola said the cordless phones feature a flip-top design that offers greater caller security by scrambling signals during transmission. The more expansive model adds a speakerphone with a dual-pad keybase. The phones will weigh 7.5 ounces.

Americans now buy more cordless telephones than they do corded ones, creating a lucrative, $700 million-a-year market.

AT&T holds a 48 percent share of the market, followed by Matsushita Electric Industrial Co.’s Panasonic brand at 10 percent, Sony Corp. at 8 percent and several smaller competitors, according to Personal Technology Research.

AT&T spokesman Steve Emery said the company would have no comment until Motorola announces the phone.

Analysts said Motorola is preparing itself for an even more profitable market that is in the making.

″What they’re trying to do is position themselves to enter the CT2 market - a second generation of cordless telephones - and they might first attack the cordless telephone market in the household,″ to iron out cost and marketing problems, Peck said.

CT2 involve replacing telephone booths with wireless base stations. Consumers would buy inexpensive hand-held receivers and could make calls anywhere within base-station range.

The system is similar to cellular technology but with a more limited range, making the cost of the service lower and allowing for smaller battery and phone size. However, the CT2 phones cannot receive calls.

Motorola already is marketing such technology in Singapore, and some CT2 systems are being set up in Europe. The FCC has not approved CT2, or a competing personal communications system called microcellular, for use in the United States.

Since the CT2 market in the United States probably won’t be developed for years, Motorola in the interim should capitalize on being the only cordless phone manufacturer to have a ″Made in the USA″ tag on it, Dworkin said.

″The cordless telephone market is highly competitive, and the industry leaders have spent years working on the costs involved and reducing those costs,″ he said. ″Motorola is not a shoo-in for success by any means, but the Motorola name and ‘Made in the U.S.’, yeah, that could have some appeal.″

Motorola alsowould have a competitive advantage by manufacturing in the United States because it could quickly fill orders for the phones, alleviating a problem overseas manufacturers have faced, Dworkin said. A disadvantage could come from the phones being the flip-top variety, which have not sold as well on the consumer market, he said.

In addition to making cellular phones, Motorola is a leading major of two- way radios, computer chips and computers.