TELECOM REPORT: Wireless Phones As Status Symbols

WASHINGTON (Dow Jones) -- It's not enough any more to make wireless phones that are easy to use, work well and have great features. Now more than ever, customers also want "cool" phones that cater to their self-image.

At least that's how top executives explain it. In recent weeks, the chief executives of both Motorola Inc. (MOT) and Nokia have repeatedly stressed how they want to build "iconic" phones that are the envy of the industry.

The desire to make products with a strong "hip" factor, of course, is nothing new. Companies have been trying to become the King of Cool since the rise of the modern corporation and rapid advances in 20th century technology.

"That's always been the underlying goal," noted Bill Hughes, a wireless handset analyst at market researcher In-Stat.

Still, efforts to develop phones that also serve as status symbols have probably been heightened by the craze over Apple Computer's iPod series of tiny music players. Apple CEO Steve Jobs, in fact, is often described as an "icon" himself because of all his cult-like inventions.

Hoping some of that success would rub off, Motorola even struck up a partnership with Apple to sell an iPod-related phone called the Rokr (rocker), though that handset has not exactly achieve "iconic" status.

Yet the blazing success of Motorola's supersleek, superchic Razr phone has clearly upped the ante. The company sold a whopping 6.5 million Razrs (pronounced razor) in the third quarter, possibly the highest sales rate of any wireless phone ever.

Though the Razr only accounted for about 17% of the 38.7 million phones that Motorola shipped during the quarter, the cutting-edge design of the handset has wowed consumers and done wonders for the company's brand image.

Sales of the Razr have also helped Motorola to narrow the gap with market leader Nokia. Motorola's global share of handset sales has surged to 19% from just under 14% a few years ago. The company aims to build on those gains in upcoming quarters with a slew of new models based on the slim Razr design.

"We've got a tremendous opportunity to build iconic, thin products," Motorola CEO Ed Zander told Dow Jones in an interview.

Nokia, for its, part, has seen its market position fall in recent years to 33% from a peak of 40% amid stiffer competition from the likes of a resurgent Motorola and other rivals such as Samsung, LG Electronics and Sony Ericsson.

For now, though, Nokia's position appears impregnable. The company's phones have always been known for their sound designs, ease of use and reliability. Indeed, the company overtook Motorola as the market leader in 1999 by churning out millions of high-quality handsets with attractive designs.

Yet Nokia has stumbled in recent years, missing out on the craze for phones with a clamshell design and failing to anticipate the clamor for ultra-slim handsets. Motorola's Razr has become a status symbol for the rich and famous. Tennis star Maria Sharapova, for example, totes around a pink version of Motorola's Razr.

Nokia executives say they've gotten the message.

"We still have a ways to go in improving our design,' CEO Jorma Ollila said Thursday at an annual event in New York with investors. "Many of our customers share this sentiment."

Perhaps Nokia's coolest new product this year is the 8800 model, a slim candybar design made of sparkling stainless steel. "The 8800 has been a huge hit, perhaps the most iconic premium product in the marketplace," Ollila said.

Motorola, of course, would beg to differ, but the point has been driven home to Nokia and other handset makers. Thin is in. So are good looks. Within a few months, other manufacturers such as Samsung plan to deliver products to compete with the Razr.

The goal, Hughes said: "Industrial design that's art."