Moto Makeover Could Cliq

MOTOROLA IS FAR FROM BACK, BUT IT APPEARS TO be heading in the right direction. After more than three years of decline in handset sales, the cellphone pioneer has a coherent plan to revive its wireless-handset business -- again. The suburban Chicago-based firm may be one of the few, if not the only, handset makers to engineer a successful turnaround.Motorola (ticker: MOT) set the standard with the StarTAC flip phone in the 1990s, then nearly fell out of the game in the next product cycle, dominated by candy-bar-shaped phones. The handset division was saved by sleek flip phones, called the Triplets, topped by the trend-setting RAZR. But there was nothing in the pipeline. Motorola was bereft of compelling smartphones rivaling the Palm, BlackBerry or iPhone.Then, after years of corporate dysfunction, the company wisely hired Co-Chief Executive Officer Sanjay Jha from wireless-chip-maker Qualcomm (QCOM) about a year ago. As I wrote in this column (Plugged In, Nov. 3, 2008), Motorola might have found the right man, but perhaps it was too late.Then again, maybe it wasn't. Last week, at a mobile conference in San Francisco, Jha unveiled Motorola's first smartphone built on Google 's (GOOG) open-source Android operating system, called the Cliq. It will be sold by T-Mobile in the U.S, and by several foreign carriers. (For more details on handsets, carriers and future devices, see Tech Trader.)Jha has been painfully forthright and pitch-perfect in setting realistic expectations for what remains a steep uphill battle. "All we need is a single or double," from the first Android devices, he said. "We don't have to hit it out of the park."Indeed, a simple base hit from these handsets would get Motorola back in the game, even if it remained the cellar-dweller in the standings. Handset success is built on platforms that take two to three years to engineer. That's how long it took for Motorola's board to clean ship and hire Jha, which put the executive behind the eight-ball. "We are making our way and looking forward to returning this business to profitability, " Jha told Barron's.He wouldn't say when newer, non-iDEN (push-to-talk) handset margins would turn positive, nor would he make outlandish predictions. After all, 16 new smartphones from seven different competitors will debut in the fourth quarter. But he did say Motorola has developed a "really capable platform," and "the numbers will follow," meaning margin improvement and increased revenue are in the offing.That prospect alone has investors optimistic. Shares jumped nearly 10% from Tuesday's 7.90 to close Friday at 8.68. Charter Equity Research analyst Ed Snyder found the handset and its Internet-friendly software "a little bit better than expected."But Snyder thinks Android optimism may already be baked into the current share price. Motorola traded as low as 0.3 times sales amid its most recent crisis, he notes. The stock since has moved up to more than 0.7 times sales. Last week was a good first step for Motorola and Jha. But this first generation of Android phones should be viewed as "more of a stopgap than a resurgence," Snyder says.