Transforming the Cell Phone

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Still, it's not exactly an easy market that modu is traying to invade. The launch comes at a time when Motorola is stumbling against the ropes and looking possibly to sell off its cell phone business. Meanwhile even phone makers that seem to be thriving are scrambling to differentiate their designs to better compete with Apple's (AAPL) iPhone and bracing for competition from new devices based on Android, Google's (GOOG) new mobile software platform.

Yet it's clear that modu may be onto something. On Jan. 31, Sony Ericsson filed a patent for a phone whose parts can be detached and reattached to create different configurations. The various modules can also communicate with each other on a wireless basis while detached so that, for example, you could leave the bulkier part in a pocket or bag while you take a call on a smaller piece with a display. While the company has yet to announce any commercial modular products, "it's a very forward-looking [peek] at what potential [devices] could look like," says Jon Mulder, a product marketing manager at Sony Ericsson.

In fact, modu won't be the first modular phone on the market. Willcom, an Asian cellular carrier controlled by the Carlyle Group, introduced a modular handset back in 2006. The basic phone comes with six modules, including a global positioning system, a fingerprint reader, and a camera that can be snapped on and off as needed. Another startup named Bug Labs plans this year to introduce up to 20 different interconnecting consumer electronics modules. "What we are really trying to do is turn the consumer-electronics industry on its ear," says Bug Labs founder Peter Semmelhack. "Why can't anyone build whatever electronics they want? Anybody can snap together the hardware. My six-year-old should be able to do it."

Domino Theory

modu says it will initially bundle two jackets with the phone module and sell the package for about $200, though some carriers might offer discounts. Later on the company expects to introduce other jackets with different functions for $20 to $60 each.

The main module is made of stainless steel so as to resist scratches when inserted into jackets. It features a small screen but no typical dial pad. Instead its black front sports seven buttons marked with domino-like dots which, when pressed, allow the user to scroll through menus and initiate and end calls. "Usually people call using the address book," says Itay Sharman, modu's CTO. "They only need to select, not dial."

The modu was designed with help from Lunar Design , which has created phones for the likes of Pantech and Motorola (MOT). The design was inspired by a black domino piece. "A domino is simple, familiar, memorable," says John Edson, president of Lunar Design. "Our goal was to create something where, when you saw it, you said, I know exactly what this is."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.