Verizon and Motorola to battle iPhone with Droid X

Motorola's Droid X smart phone, which will be available through Verizon Wireless, is displayed during a news conference announcing its release in New York June 23, 2010.

NEW YORK (Reuters) - Verizon Wireless plans to start selling Droid X next month, launching the latest phone from Motorola Inc based on Google Inc's Android software.

The move comes as the three companies try to keep pace in the intensely competitive smartphone market, which this week will see Apple Inc roll out its much anticipated iPhone 4 on five continents.

Verizon Wireless, the biggest U.S. mobile provider, said the Droid X phone will go on sale July 15 for $199.99 after a $100 rebate to customers signing a two-year contract.

The Droid X has a 4.3 inch touch-screen and an 8 megapixel camera, according to Verizon Wireless, which already depends on Motorola's Android phones as a key weapon in competing against AT&T Inc, the exclusive U.S. provider for iPhone.

But Current Analysis analyst Avi Greengart noted that as well as battling iPhone, the latest Motorola phone will also have to fight for prominence on Verizon Wireless store shelves against HTC Corp's popular Droid Incredible.

"This won't dissuade somebody who wants an iPhone 4 but it will keep customers who want to stay with Verizon Wireless happy," said Greengart.

Verizon Wireless Chief Marketing Officer John Stratton said he has planned a "very major" marketing campaign for Droid X.

"We think this is going to be a terrific product," Stratton said, noting that his goal would be for the phone to sell faster than the first Droid, which sold 2 million units in the fourth quarter of 2010 when it launched.

Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, also announced on Wednesday that any customers coming to the end of their contract in 2010 would be able to immediately upgrade to any smartphone, including the Droid X.

Motorola and Verizon Wireless hope the phone stands out in particular for its multimedia capability due to the relatively large screen and a high definition video player.

But JPMorgan analyst Rod Hall worried that the phone's battery would compare badly with iPhone's and he questioned how popular the device's size, larger than usual, would be.

"We believe that the very large form factor screen may put some users off as pocketability is diminished," Hall said in a research note.

But Motorola executives cited several reasons why consumers may prefer Droid X including a removable battery and the option to add more storage, all features that are absent in iPhone.

Droid X includes Swype software, which Apple lacks. Swype helps make typing on the touch screen keypad faster and more accurate as the user can drag fingers between letters instead of tapping on each letter individually.

SEES NO DROID X SHORTAGES

The Droid X allows consumers to rent and buy movies from Blockbuster Inc to watch on the phone. Movies cost $9.99 to purchase and $3.99 to rent using the Wi-Fi network. Unlike iPhone 4, the Droid X will support Adobe Flash.

Motorola Co-Chief Executive Sanjay Jha said he sees the device selling well despite the disproportionate amount of attention the iPhone launch has attracted.

"There's a meaningful amount of traction we can get through the summer period," he said in an interview.

Jha said he was seeing some tightness of supply of components such as chips and phone screens but said he is comfortable the company would meet demand for the Droid X.

For its part, Google's Android system has been gaining some ground on iPhone in the last year. Google's head of engineering Andy Rubin said at the Droid X phone launch that about 160,000 new consumers were signing on to Android phones every day, up from the 100,000 per day it announced in May.

USAGE BASED PRICING

Verizon Wireless also hopes to attract new customers to Droid X by keeping a $29.99-a-month unlimited-data-download service for Droid X customers. AT&T recently eliminated its unlimited data use plans.

However, CMO Stratton said Verizon Wireless would turn to usage-based data pricing in the "not too hugely distant future." He said the company is deep into the process of working out a new pricing system as a usage-based model would help ensure a heavy bandwidth users do not strain the network.

The operator is already starting to limit data downloads for customers who use the Droid X as a hotspot to connect up to five devices at a time using its short-range Wi-Fi connection.

Verizon Wireless will charge $20 a month extra for this service with a data download limit of 2 gigabytes after which every megabyte downloaded would cost 5 cents, implying a $50 surcharge for every additional gigabyte downloaded.

(Reporting by Sinead Carew; editing by Gerald E. McCormick, Bernard Orr, Gary Hill)