Shares in Semiconductor and communications equipment giant Motorola Inc tumbled almost 5% yesterday following reports that it is struggling to correct defects in its cellular phone network equipment. The faults have already lost the company a $500m contract with US cellular operator PrimeCo Personal Communications Inc, according to a report in the Wall Street Journal. PrimeCo, owned by Bell Atlantic Corp, US West Inc, and AirTouch Communications Inc has reportedly canceled orders for CDMA equipment from Motorola. Instead the company is thought to be preparing an announcement that it will instead turn to rival supplier Lucent Technologies Inc in order to built out its PCS network. Neither Motorola nor PrimeCo would comment on the report dismissing it as speculation. However, PrimeCo denied it was set to make any major announcement in the next few weeks or that it is in discussions with both Motorola and Lucent, its two network equipment suppliers. According to the report, PrimeCo had blamed faulty Motorola equipment for 100 network failures last year. The news, if correct, seriously questions the credibility of Motorola’s next generation network hardware and in particular its CDMA base station controller, which is thought to be the cause of the problems. The failure will be a huge blow to Motorola which has seen its share of the world mobile phone business decline over recent years following rumors that its GSM handsets were inferior. Motorola counts a number of PCS operators among its customers including AirTouch, Cox Communications and Sprint PCS. Should the faults turn out to be correct and applicable across its CDMA technology, Motorola could miss out on billions of dollars in lost business. Motorola has $3.5bn in orders to supply similar equipment to the Japanese market and is to provide up to $1.4bn worth of equipment to Sprint PCS, the largest PCS provider in the US. Motorola closed the day down 4.75% at 57.625.
