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Motorola Wins Hype Battle in Smartphone War


Investors are betting on the Droid's success.

Motorola (MOT) has much to celebrate this week. In addition to debuting its highly anticipated Droid smartphone this Friday, Citigroup analyst Jim Suva upgraded the company's shares to Buy from Hold. See this morning's Upgrades & Downgrades.

Running Google's (GOOG) constantly improving Android operating system, the Droid is already enjoying some positive pre-release reviews and looks to become a viable competitor to Apple's (AAPL) iPhone.

In the meantime, Research in Motion (RIMM), which makes the BlackBerry, and Palm (PALM) suffered through the proverbial dropped calls to Motorola's full bars. Suva downgraded Research in Motion and Palm to Sell after having them at Buy and Hold, respectively.

He contends that the two cell phone manufacturers will stand little chance in the conjoined shadow of two very impressive devices.

In a research note, Suva writes, "Motorola is launching one of the most compelling offerings at [a] time when many investors have given up on the company's handsets." He continues, "The revolution of product and application service offerings is going to start to crack open the enterprise door and could pose a risk for BlackBerry."

Suva notes that Motorola will be posing an increase in promotion for its Droid device and it will post a considerable challenge for Research in Motion and Palm.

Even though Verizon (VZ) was "very pleased" with first-day sales of the BlackBerry Storm 2 and UK's Palm Pre launch in October was deemed "successful," it wasn't enough to sway Citigroup from branding Research in Motion and Palm with lamentable grades.

Suva's target price on Motorola was raised a buck fifty to $10.50, while his target for Research in Motion was slashed in half to $50 from $100. The target for Palm fell to $10 from $19.50.

Investors in Research in Motion put Suva's recommendation to action on Monday. Shares fell nearly 5% in morning trading, while Palm shares gained slightly. Motorola shares gained nearly 5%.

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