Modu unveils flexible phone with "jacket" range

By Sinead Carew and Franklin Paul

NEW YORK (Reuters) - With a nod to the notion that mobile phones have become fashion accessories, Israel's Modu says it can make $1 billion in revenue by selling "jackets" for its tiny new cell phone that give the device new functions as well as a new look.

Start-up Modu's plan is to sell a range of casings along with its cell phone so that consumers can cheaply transform phones into anything from a messaging device, a music player or a gaming device, according to founder Dov Moran.

The phone morphing system goes on sale with three service providers in Russia, Italy and Israel in October, around the same time the company expects top fashion houses to have developed phone jackets for style conscious users.

By January next year the phone will also slot into consumer electronics devices it calls "modu mates" such as digital photograph frames, cameras, clocks or navigation systems to give such devices wireless connectivity.

Modu, whose backers include SanDisk Corp (SNDK.O: Quote, Profile, Research), says it can generate $1 billion annual revenue in 2011 in the fiercely competitive mobile industry, which is dominated by market leader Nokia (NOK1V.HE: Quote, Profile, Research) and its four biggest rivals.

"It's not like the top five companies where everybody makes devices similar to the others," said Moran referring to Modu, in which he has invested $5 million.

"We're going to change the cellular market," he said.

So far the mobile business of Telecom Italia (TLIT.MI: Quote, Profile, Research), BeeLine, owned by Russia's Vimpelcom (VIP.N: Quote, Profile, Research) and Israel's Cellcom Israel (CEL.TA: Quote, Profile, Research)(CEL.N: Quote, Profile, Research) have all agreed to start selling the phone in the fourth quarter, according to Modu.