Sprint Nextel, the No. 3 U.S. mobile service provider, plans to launch two Motorola Mobility smartphones this summer, opening up a new market for Motorola, which has been absent from Sprint's high-end phone line up until now.
Sprint is looking to the advanced phones to fend off rivals while Motorola is pushing for new operator customers since its biggest client Verizon Wireless started selling the Apple Inc iPhone in February.
Motorola also hopes to compete more directly with BlackBerry maker Research In Motion for business customers through Sprint.
Both of the new phones announced on Thursday are based on Google Inc's Android software, which has surpassed iPhone in popularity and helped Motorola revamp itself in the last year and a half.
The Motorola Photon 4G, the most advanced of the devices, will run on Sprint's highest-speed data service and come with advanced security features aimed at attracting business users who often favor BlackBerrys, Sprint and Motorola said.
Photon also will work overseas, which is typically not the case for Sprint phones.
Photon will run on an advanced dual-core Tegra 2 processor from Nvidia and will come with an accessory dock that looks like a laptop but needs to be attached to the phone to work similar to the Atrix phone sold by AT&T Inc.
Sprint promised competitive pricing but did not give details. It sees the Photon as one of its most important devices for the year and plans to launch it with a substantial marketing campaign, David Owens a Sprint product development executive told Reuters in an interview.
Owens said Motorola's success with Android products, such as the first Droid phone at Verizon Wireless, led Sprint to reconsider it as a smartphone vendor. Sprint had mainly just turned to Motorola phones for its proprietary walkie-talkie style iDen service, which it will phase out in coming years.
Motorola Chief Executive Sanjay Jha said Sprint's shifting technology focus was likely a factor in the new agreement.
Because we've had a good relationship with them in iDen there's been a little sense Motorola is too big a part of their portfolio, Jha told Reuters, adding that this would change as Sprint starts the process of shutting down its iDen network.
Photon is based on a high-speed wireless technology standard known as WiMax, which is not widely used around the world, making it less economical to develop products on that standard as the potential market is much smaller.
Motorola initially held off producing WiMax phones as top U.S. providers Verizon Wireless and AT&T Inc are both moving to rival high-speed technologies.
Jha said he sees Photon profit margins similar to Motorola's other phones but did not elaborate. He said he also hopes to sell a version of the phone to Japan's KDDI Corp, which supports the same technologies as Sprint.
Jha said he hopes to have more than 10 devices on sale at Sprint by the end of the year including Android phones, tablets and the legacy iDen devices.
While Motorola said its Atrix phone had sold well at AT&T, the laptop-like accessory, referred to as a laptop dock, had seen less success there as it was priced too high and was criticized by reviews. Jha said the company would have more competitive dock offerings later this year.
The second Motorola device at Sprint, the Triumph, will be a less powerful device than Proton and will be sold to its Virgin Mobile customers who pay for calls in advance but don't commit to long-term contracts.
In the past, the success of Sprint's summer phone launches such as that of the Palm Pre have been hampered by their arrival around the same time as Apple kicks off sales of its latest version of iPhone.
But since Apple is not expected to bring out a new version of iPhone until September this year, Sprint may have a better chance this year as long it gets its phones out soon.
The earlier you can launch the better because in September the air will be sucked out of the room by the iPhone, said Morgan Keegan analyst Tavis McCourt. He described the Sprint news as a pretty big step for Motorola.
Motorola shares ended off 66 cents, or 2.7 percent, at $23.36 on New York Stock Exchange where Sprint finished up 7 cents, or 1.3 percent, at $5.41.
(Reporting by Sinead Carew; editing by John Wallace and Carol Bishopric)