Phone.com drops as Motorola bearish on Net phone demand

NEW YORK: The shares of wireless software provider Phone.com Inc. slid more than 17 per cent after cell phone maker Motorola Inc. said demand for Internet enabled phones was not as strong as expected and day traders spooked by a lawsuit drove down the stock, analysts said.

The shares of the Redwood City, Calif.-based maker of software that allows users to surf parts of the Web using their wireless phones, were closed down $18-15/16 to $91-9/16. Phone.com was the third-largest net loser on the Nasdaq, while Software.com Inc., which Phone.com is acquiring, was the largest loser, with shares off $28-1/2 or 16.26 per cent.

"There was some negative chatter from Motorola," Bank of America Securities analyst Rob Sanderson said. "They had a pretty lousy quarter and disappointing sales in WAP phones." WAP - Wireless Application Protocol - is the standard Phone.com uses to run its wireless Internet gateway though which users access Web pages.

On Tuesday, Motorola - the world's second biggest maker of cell phones after Nokia - cut earnings estimates over the next two years in part because of slower projected global growth in the mobile telephone market. The company also said consumers adopted Internet-enabled phones more slowly than expected. Since the beginning of the year, Motorola shipped 16 million Internet enabled telephones.

But Sanderson said a disappointment for Motorola may not translate into one for Phone.com, which reports fiscal first quarter results October 18. Last quarter, the company said it had 4.1 million visitors to its gateway, Sanderson said. "That's 16 million just from Motorola that can hit this WAP gateway," he added.

However, US Bancorp Piper Jaffray analyst Edward Jackson said day-traders drove down the stock after news that the international Trade Commission has begun an investigation into whether Phone.com, Sanyo Electric Co. Ltd. and Sanyo North America Corp. violated Geoworks Corp.'s ' U.S. patent seeped into online chat rooms frequented by the small investors.

Both companies have pending lawsuits against each other. "It was all day-trading," Jackson said. "None of it is instructional. It's all retail. The chat rooms is what it's all about."

(C) Reuters Limited 2000.