Motorola's Droid has Google navigation features

By Sinead Carew

NEW YORK (Reuters) - Motorola Inc's new Droid phone will be the first to use navigation software from Google Inc, in a direct challenge to GPS device makers Garmin and TomTom.

The Droid will go on sale on November 6 at Verizon Wireless, the largest U.S. mobile service provider, which said it will promote the phone with its biggest marketing campaign ever. It will cost $199 for customers who commit to a two-year service contract, Verizon Wireless said on Wednesday.

Shares of TomTom fell 19 percent, extending their losses after the Dutch navigation device maker said earlier on Wednesday that economic weakness was making holiday sales tough to predict. ID:nLS458927 Garmin shares fell 12 percent.

The Droid, which includes a computer-like keyboard and a new version of Google's software, Android 2.0, will also compete against Apple Inc's iPhone which is available on AT&T Inc's network in the United States.

Verizon Wireless Chief Marketing Officer John Stratton said he believed the Droid would hold its own against the iPhone, even as he conceded that Apple had revolutionized the smartphone industry.

"We have to demystify the notion that (iPhone's) untouchable," Stratton told reporters at the launch event in New York. "This product can stand up and compete."

Google said Android 2.0 would include a Google Maps Navigation product with real-time, turn-by-turn walking or driving directions. ID:nN27274525

It will also respond to voice commands and offers a visual display that incorporates Google's online archive of street photographs.

Motorola said Droid was the world's thinnest phone to feature a slide-out QWERTY keypad. It also sports a five-megapixel camera and a day's worth of battery life.

"It's a pretty dramatic evolution of what Android was," Motorola Chief Executive Sanjay Jha told reporters.

Droid represents a massive bet for Motorola, which after losing ground to rivals for more than two years has reorganized its entire mobile business around the development of phones based on Android.

Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, will look to the device to help it stem market-share losses to AT&T.

Verizon recently started showing Droid video ads highlighting its advantages over iPhone, without actually describing the device itself. Stratton did not say how much the marketing campaign would cost.

"As long as it's not buggy, it will do quite well," Current Analysis analyst Avi Greengart said. "I don't think this will single-handedly save Motorola but it's a crucial step."

Greengart said that Android was "closing the gap" with rivals.