(FORTUNE Magazine) - Hundreds of Motorolans jammed into a company auditorium in Schaumburg, Ill., last December to mourn the sudden death of their storyteller-in-chief. It was a bittersweet moment for Motorola. Geoffrey Frost, the 56-year-old marketing genius responsible for the company's snappy "Hello Moto" ad campaign, had died in his sleep of a heart attack two weeks earlier. Thanks in no small part to Frost's dramatic flair, the proud but humbled company was on the upswing for the first time in years. CEO Ed Zander, who eulogized Frost that day, had promoted him to executive vice president only hours before he died. Frost, you see, had become a symbol of Motorola's resurgence as an unexpectedly stylish technology powerhouse.

For a few engineers and industrial designers attending the memorial service, though, Frost represented something more.

The celebration of his life drew attention to their greatest accomplishment, the creation just two years earlier of the ultrathin, superhip RAZR V3, the hottest Motorola (Research) phone in nearly a decade. Frost had been the phone's cheerleader; he'd come up with its catchy four-letter name. He also had spun an appealing narrative about how Motorola was cool again, and a myth about the slick downtown Chicago design studio where the phone had taken shape.

What the unsung team of heroes knew, however, was that the actual story of how the RAZR came to be is even more compelling than, if not quite as glamorous as, the version Frost had peddled. In reality, the RAZR - a play on a code name the geeks themselves dreamed up - was hatched in colorless cubicles in exurban Libertyville, an hour's drive north of Chicago. It was a skunkworks project whose tight-knit team repeatedly flouted Motorola's own rules for developing new products. They kept the project top-secret, even from their colleagues. They used materials and techniques Motorola had never tried before. After contentious internal battles, they threw out accepted models of what a mobile telephone should look and feel like. In short, the team that created the RAZR broke the mold, and in the process rejuvenated the company.

The mood inside Motorola was grim in early 2003. Nokia, whose "candy bar" phone designs were all the rage, had snatched Motorola's No. 1 worldwide market share, and wireless operators were decidedly underwhelmed by the models Motorola had to offer. The outlook was equally gloomy for a veteran Motorola engineer named Roger Jellicoe. An Englishman who'd lived in the Chicago area for nearly 20 years, Jellicoe had worked on numerous Motorola phones, including the StarTAC, the company's last monster hit, in 1996. But Jellicoe, 50, who sports a pale-brown salt-and-pepper goatee, had recently had a project yanked out from under him, a high-end phone targeted for overseas markets that had been reassigned to a Motorola design center in Beijing. He was, quite literally, between assignments.

Fortunately for Jellicoe, another project was percolating. Engineers in Motorola's concept-phone unit had mocked up an impossibly thin phone - at ten millimeters, it was half the girth of a typical flip-top - and Rob Shaddock, a senior wireless executive, was casting about for an engineer to lead the team that would commercialize it. Jellicoe aggressively promoted himself for the job and in the spring of 2003 maneuvered a dinner with Shaddock to make his case. They met at Ferkin's, a cheerful pub in downtown Libertyville with better-than-average food and 24 beers on tap. In advance Jellicoe had drawn up sketches of what the phone might look like (drawings that bear a striking resemblance to the RAZR today). Midway through the meal, Shaddock told Jellicoe the job was his.

Jellicoe's instructions were to create the thinnest phone ever released - and to do it within a year. The goal was to make a splash at the next year's Academy Awards, on the last day of February 2004. Celebrities would be seen clutching these new prizes, and publicity would rain down on the company. The phone was supposed to be something beautiful, like jewelry - a pricey gem in the $500 range at retail, rather than a mass-market staple. Motorola needed a reputation builder, badly. The moneymaker phones would come after, or so the plan went, piggybacking on the company's restored allure.

For a Motorola lifer like Jellicoe, this task, while daunting, was also liberating. If the phone was never meant to be a blockbuster--if it was in essence a high-end toy, judged on its wow factor more than its sales - that gave him license to take some chances.

To design the innards of a telephone takes a team of specialists. Jellicoe, an electrical engineer, turned to an old pal, Gary Weiss, a mechanical engineer with whom Jellicoe had once designed a phone over a cup of coffee at Starbucks (Research). The project's appeal proved to be a talent magnet within the company, and the two quickly assembled a team that grew to as many as 20 engineers. The full group met daily at 4 P.M. in a conference room in Libertyville to hash over the previous day's progress as they worked down a checklist of components: antenna, speaker, keypad, camera, display, light source, and so on. Scheduled for an hour, the meetings frequently ran past 7 P.M.

The "thin clam" project became a rebel outpost. Money wasn't an object, but secrecy and speed were. Normally Motorola consults closely with the wireless companies that sell the phones to try to integrate whatever favorite features they request. It also conducts "mall intercepts" to gauge consumers' reaction. Not this time. Jellicoe hid the details of the project even from company colleagues. "Anytime you've got something radically different, there will be people who feel that we should be putting our resources on other stuff," he says. For cover, Jellicoe relied on Shaddock, who says, "It was a kind of lock-the-door-and-put-the-key-beneath-it approach to product development." Digital pictures of the project were prohibited, so nothing could be inadvertently disseminated by e-mail. Models of the phone could leave the premises only when physically accompanied by a team member.

As Jellicoe's engineers focused on the inside of the slender phone, a soft-spoken industrial designer named Chris Arnholt was envisioning what it would look like on the outside. Arnholt, 30 at the time, had joined Motorola two years before from a design boutique in Rochester, N.Y., called KEK. Ponytailed and usually dressed all in black, Arnholt carries two checkbook-sized notebooks, one for writing down things to do, the other for observations he doesn't want to forget. "Design is really about communication," he says. "Sometimes my ideas are tough to communicate." Arnholt was the yin to the engineers' yang. Where they calculated radio frequencies, he pondered the curve of the phone's "knuckles," or hinges. While they bounced around one another's workstations at the office, Arnholt escaped to his tranquil apartment in Highland Park, a lakefront suburb near Libertyville, where deer sometimes wandered into the backyard from a nearby forest.

The phone that became the RAZR owes many of its most distinctive elements - from its smooth aluminum finish to its backlighted keypad - to Arnholt's obsession with what he called "rich minimalism." To conceptualize his design ideas, he'd bring home prototypes made from sculpted cornstarch, and then fashion and refashion their appearance, using masking tape to adjust previous versions. "Chris is excellent at working the details and then refining the hell out of them," says Jim Wicks, Motorola's chief designer. Arnholt would then render his designs onto the page. Another designer would translate them into three-dimensional computer graphics. And from that program, model makers in Libertyville would craft a plastic mockup of the design.

Applying the laws of physics to Arnholt's stylish sketches was an exercise in collaboration, and not always a seamless one. Through the late summer and early fall of 2003, the engineering and design teams began combining their work, a back-and-forth process that mechanical engineering chief Gary Weiss aptly calls the "dance." Arnholt began attending the daily 4 P.M. meeting, as each roadblock thrown up by the engineers was translated into an endlessly tweaked design. As the team contemplated each feature of the phone, every decision had a snowball effect on another feature. An antenna in one place meant an earphone connector had to go someplace else. The team members - and often their bosses - repeatedly haggled about what the phone should and shouldn't have in it.

Nearly every argument came down to the tradeoff of functionality vs. thinness. Shaddock, for instance, was willing to jettison the caller-ID display on the outside of the flip phone, believing it added unnecessary thickness. Jellicoe felt otherwise: All other high-end phones had that feature. But what might have to go to make room for it?

Two key innovations allowed the team to make quantum leaps in thinness. The first was a Jellicoe brainstorm: placing the antenna in the mouthpiece of the phone instead of at the top. An innovative idea, it was also a technical challenge. Jellicoe set up a competition among five of his engineers to see who could come up with the best design. Tadd Scarpelli, a then-32-year-old engineer who likes to take apart and rebuild car engines in his free time, devised the most elegant solution. The second brainstorm was rearranging the phone's innards, primarily by placing the battery next to the circuitboard, or internal computer, rather than beneath it. That solution, however, created a new problem: width. Motorola's "human factors" outfit had concluded that a phone wider than 49 millimeters wouldn't fit well in a person's hand. The side-by-side design yielded a phone 53 millimeters wide.

But the RAZR team didn't accept the company's research as gospel. The team made its own model to see how a 53-millimeter phone felt. Says Frank Stone, a mechanical engineer who worked on the battery placement: "People could hold it in their hands and say, 'Yeah, it doesn't feel like a brick.' " In the end, the team members decided for themselves that the company was wrong and that four extra millimeters was acceptable. They ended up reaching a similar conclusion about the ten-millimeter-thickness target: Ultimately, they were able to construct a phone with all the features they wanted that measured 13.9 millimeters at the beam, exceeding the target by a little more than an eighth of an inch. Still, that was 40% thinner than Motorola's slimmest flip-top phones. Everyone agreed it was more than thin enough for the statement Motorola was trying make.

As the thin-clam team made progress in combative isolation, the mood at Motorola had gone from bad to worse. In the fall of 2003 the company lacked enough camera lenses to supply phones for the coming holiday shopping season. The stock plunged 5% in September when word came out about the camera-phone snafu. That same month the board asked CEO Christopher Galvin, a grandson of the company's founder, to retire. In December it further humiliated senior management by hiring an outsider, former Sun Microsystems (Research) president Ed Zander, to run the company. Zander started at Motorola on the first business day of 2004 without unveiling a strategy but promising to rid the company of its hidebound ways. He didn't let on publicly, but early in his tenure he got a look at the ultrathin phone. He liked what he saw.

He wasn't the only Motorolan beginning to sense that this trim phone was something special. Tom Lynch, head of the cellphone division at the time, recalls Rob Shaddock becoming obsessed with it. "Every time I saw him he had it in his hand, whether it was in a staff meeting or having a beer," says Lynch, who has since left Motorola to become CEO of Tyco's electronics business. "He was constantly flipping it open and turning it around and rubbing it."

The phone team did have its troubles. It became clear, for instance, that it would miss the February 2004 deadline. Perfecting the materials and appearance of the cool-blue "night signature" of the keypad was such a sticking point that Chris Arnholt traveled to South Korea to work with the supplier chosen to make keypads for the phone. An Oscar debut would have to wait.

By the summer, almost a year after Arnholt had begun playing with prototypes at his apartment, the phone was ready for its closeup. The thin clam had acquired a formal code name early on. Jellicoe wanted to call it the siliqua patula, which is Latin for "razor clam." That bit of geek humor was too much for the team's project manager, Bill Kastritis, who insisted on calling it the Razor, as in razor thin. The initial marketing plan labeled the phone the V3, in keeping with Motorola's naming convention. (Previous phones were the V300, V500, and V600.) Enter Geoffrey Frost, the marketing chief who had paid close attention as the phone project progressed. He was enamored with what the phone could do for Motorola but couldn't bear the thought of such an elegant device going out into the world with such a pedestrian name. Borrowing from the team's code word, he hit on an eye-catcher: the four-letter RAZR.

Frost also orchestrated the phone's first public appearance. Motorola had privately shown models to a handful of network executives in backroom presentations at trade shows early in 2004. But in June, Frost's team started feeding the hype machine by offering a sneak peak at a gadget fashion show for design-oriented journalists at Copenhagen's Arken Museum of Modern Art. As for the official unveiling, it is industry tradition that new phones are released at a wireless conference. Zander insisted that, once again, the plan be different for the RAZR. Inspired by the attention Steve Jobs gets each time he debuts a new toy, Zander launched the RAZR in a splashy presentation at Motorola's annual meeting with financial analysts in Chicago in July.

The new phone was a hit, shipping first in Asia and then with Cingular Wireless in the U.S. Yet even at that stage it was positioned as a niche product. In the fourth quarter of 2004, out of the 29 million handsets Motorola shipped, RAZR accounted for an impressive though hardly astronomical 750,000. It was a new executive, Ron Garriques, who took over the cellphone division that September, who pushed for Motorola to go large with the RAZR.

"I looked at the budget for 2005, and we were planning two million," recalls Garriques, who previously had been head of European operations. "I said, 'We need to build 20 million.' " How right he was. The company sold even more RAZRs than that in 2005, and projects it will sell its 50-millionth RAZR this month. "That's one-tenth the time it took the StarTAC to get to that level," notes Garriques. Zander favors a different comparison: "We'll sell more RAZRs this year than Apple will iPods."

Last July several key players from the RAZR development team were asked to appear at a meeting of top executives at company headquarters. They weren't told why. "Even when we were sitting in the room waiting to be called in, nobody was really quite sure what was going to happen," says Tadd Scarpelli, the young engineer who designed the RAZR's antenna. Then, as the team members filed in, the executives awaiting them rose in applause, delivering a standing ovation - followed by news that the team members would also be rewarded with a boatload of stock options. "It was surreal," says Scarpelli, who to this day approaches strangers in airports and asks them if they like "his" phone. Successful rule breakers, after all, have certain privileges.

Research associate Susan Kaufman contributed to this article.