Big Moto X Phone Launch Has Low Stakes for Google

Moto X (via @evleaks)

By Amir Efrati

Google’s Motorola Mobility unit is busy briefing analysts and reporters in New York about the Moto X, its high-end, flagship smartphone. The device is scheduled to launch in the U.S., Canada, Latin America, Europe and elsewhere starting this month.

You should expect full reports on the device to surface online this afternoon. You also should expect to soon see advertisements for the Moto X all over TV and the websites you visit, per my earlier report about the hefty marketing budget of up to $500 million for the device. And because of the promised ad spending, all major wireless carriers in the U.S. are expected to sell it.

But for Google, frankly, the stakes aren’t very high. The Internet behemoth’s Android mobile operating system powers the vast majority of new smartphones being shipped and shows no sign of slowing down, regardless of how Motorola performs. Android handsets are preloaded with Google’s revenue-generating software, including its Web-search engine.

At Motorola, of course, executives are eager to make a dent in the smartphone market that has been dominated by Samsung and Apple while other hardware manufacturers fight for the scraps. Moto’s short-term goal: become No. 3 smartphone seller, a spot now occupied by LG, according to IDC. 

And Google does hope the cell phone pioneer can stem its operating losses. The unit, which Google snapped up for $12.5 billion last year, has been a drag on its earnings over the past year.

Motorola believes several key features of the Moto X will resonate with consumers. First: speed. The Moto X is “always ready for you” in that its microphone will always been “on,” letting the owner quickly operate it by giving voice commands. And with the shake of a wrist, the owner can bring up the camera app without fussing around. Despite the always-on sensors in the device, its battery is supposed to last a full day, according to a person who has used the device.

Second: “It’s designed by you.” In what is possibly an industry first, Motorola is giving people the ability to personalize their smartphone hardware with back-panel colors, engravings (a la iPod) and other features, especially when they order the device online. And Motorola hopes to appeal to domestic consumers by promoting the fact that it’s assembling their devices in the U.S.A.

Third: The device will be “almost pure Google,” according to the person who has used it. In the U.S. market, the devices won’t have lots of preinstalled add-on apps made by wireless carriers, also known as “bloatware.” In other words, owners are supposed see a dozen or so preinstalled Google apps, such YouTube and Google+ — but not much else.

With more than 900 million smartphones expected to be sold this year worldwide, there is opportunity for a strong No. 3 to rise up.

That could be difficult for Motorola for a number of reasons, not the least of which is its focus on a relatively small number of markets for its new devices.

So far there is little evidence that Google will eat the hardware costs and price the Moto X well below the competition. Earlier this summer, a person with knowledge of Motorola’s strategy told me that the price of the Moto X is expected to be roughly in line with the Apple iPhone and Samsung Galaxy S4. In the U.S., such devices can cost $600 without a wireless contract and about $200 with a contract.

No matter what happens with the Moto X, Motorola – and thus Google – will learn a lot from this experience. And the acquisition of Motorola is looking smarter by the day as other Android-device manufacturers such as HTC struggle, leaving Samsung as the dominant player.

Even Motorola employees realize that they are part of an expensive insurance policy in case Samsung becomes a bigger threat to Google. But they’re confident they will earn Google’s respect in the meantime

A Motorola spokesman declined to comment.