Sample 'new' cell phone really just modified Nokia
FRIDAY MARCH 29 12:00AM
THE SAN FRANCISCO CHRONICLE
COPYRIGHT 2002 THE CHRONICLE PUBLISHING CO.
Hop-On.com's new disposable cell phone, touted everywhere from Time
Magazine to CNNfn as a landmark innovation, may be less original than it
seems.
In news releases and interviews, the publicly traded California company says it
has developed and manufactured an "innovative, technologically advanced"
phone so cheap that customers can toss it away when they are done. Hop-On
says the phone will retail for $ 30, including 60 minutes of calls.
But after cracking open several samples with Hop-On's name and kangaroo logo,
The Chronicle found the "revolutionary" device appeared to be little more than a
jury-rigged Nokia in a new plastic shell.
Underneath the red plastic casing, one sample was clearly labeled inside as a
"Nokia 8260."
Another Hop-On cell phone contained a part with Cingular Wireless' name and
logo. Cingular spokeswoman Monica Mears said the part, called a SIM card, came
from a batch of 100 Nokia 8290s it sold Hop-On last year. A white rechargeable
battery in the phone also looks identical to one used in Nokias, though the name
has been etched off. Only the circled R, denoting a registered trademark,
remains.
"All the components that make it work are ours," said Nokia spokesman Keith
Nowak. Nokia, which examined the samples at The Chronicle's request, said it is
considering whether to take action against Hop-On.
Hop-On Chief Executive Officer Peter Michaels was initially evasive when asked
why the phones appeared to be modified Nokias. "Hop-On technology is
proprietary," he said in a faxed reply.
But after The Chronicle explained its findings in greater detail, Michaels said the
repackaged Nokias were "promotional samples only. They are not Hop-On
production phones."
Michaels explained that the Garden Grove (Orange County) company was forced
to use Nokias to produce the samples because of glitches with its own invention.
"We had to scratch one of our designs," he said. Michaels, however, insists
Hop-On is working out the bugs. "We are light years ahead of anyone," he said.
Still, even if Hop-On used the modified Nokias only to show off its concept, an
industry analyst said Hop-On should have clearly disclosed that fact.
"I think (to call it) misleading would be putting it lightly," said Allen Nogee, a
wireless components analyst with Cahners In-Stat, a technology research firm in
Scottsdale, Ariz.
Moreover, the disclosure raises questions about whether Hop-On will be able to
launch an ultracheap wireless phone anytime soon.
Hop-On says it hopes to sell its phones in stores for $ 30 each. But the Nokia
models used for the samples carry a wholesale price of $ 220 to $ 250, not
including talk time, estimates Lance Frey of LetsTalk.com, a San Francisco
wireless reseller.
And the company has yet to receive approval from the Federal Communications
Commission to manufacture its own phone.
"Is it even possible to make a $ 30 phone?" Nogee asks. "I have my doubts."
As previously reported, The Chronicle found a raft of other questions surrounding
the company. For instance, the California Department of Corporations raided an
online gambling venture tied to Hop-On in 1999 for allegedly fleecing investors
out of as much as $ 20 million. And last month, the state suspended Hop-On's
corporate status, saying it had failed to pay $ 400 and file its tax returns for two
years in a row.
Nevertheless, Hop-On's foray into disposable phones sent its stock soaring from
2 cents to a high of $ 1.50 in December, before sliding back. Shares closed at 30
cents in over-the-counter trading yesterday.
In addition, Michaels said the company has raised close to $ 5 million from
investors so far, though the details remain sketchy.
But several of Hop-On's statements raise questions.
Last year, for instance, Hop-On boasted in several news releases that the
phones would be widely available in Chevron mini-marts. "Michaels says Chevron
wants to offer Hop-On in all 8,000 of its U.S. outlets," according to an Intel-Card
News article posted on Hop-On's Web site.
Yet ChevronTexaco said it doesn't plan to carry the phones after all.
"We did have discussions with Hop-On, and the decision was made not to go
forward," said ChevronTexaco spokeswoman Nicole Hodgson.
Hop-On also said it has struck deals with other major retailers, predicting last
year that more than 27,000 stores would stock the phones. The company posted
seven articles on its Web site saying that the phones would be distributed in
Kmart, Target and 7-Elevens, and five promising that the phone would be sold in
Walgreens drugstores.
None of the companies, however, said they had agreed to carry Hop-On's phone.
"We don't sell this product, and there are currently no plans to carry this item,"
said Kmart spokeswoman Nicole Dowswell.
To be sure, Hop-On struck a deal last fall with Universal Studios Home Video to
give away several thousand phones branded with the "Jurassic Park" logo. And
Wakefern Food Corp. of Elizabeth, N.J., agreed to sell up to 50,000 phones at its
ShopRite Supermarkets in the Northeast.
But both companies said they recently scuttled the deals. A Universal
spokeswoman said Hop-On could not deliver the phones on time. And Wakefern
spokeswoman Karen Meleta said Hop-On was "not able to supply us with some
information we requested."E-mail Todd Wallack at twallack@sfchronicle.com.
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