Looks like Google's Motorola phone unit is eager to go where Apple won't: downmarket.
On Wednesday, Google (GOOG) unveiled the Moto G, a lower-cost version of the flagship Moto X phone, at an event in Sao Paulo, Brazil. This is its second smartphone developed entirely after acquiring Motorola and is meant to compete in fast-growing emerging markets such as Brazil and India.
Google’s smartphone sales could certainly use a boost. Slow sales of the Moto X, unveiled in August, disappointed investors hoping for more impact after the multicolored, plastic-cased device received positive reviews. Under 1 million units have been sold since its debut, analysts said. And while the rest of Google has reported strong profit growth this year, losses at Motorola are mounting.
“All is not lost; it’s the holiday season coming up,” says Ken Hyers, senior analyst at Strategy Analytics. Still, Hyers doesn't expect sales will increase enough to erase Motorola's losses. "That's not going to happen this year," he says.
The new Moto G will start at just $179 without a mobile contract or subsidy from a carrier. The plastic-cased phone won't have the fastest connection technology, LTE, but otherwise looks much like the more expensive Moto X, which sells for $500 without a contract. The Moto G has a 4.5" high definition screen versus the 4.7" screen on the Moto X. It also has a slower processor and lacks the X's voice activation feature triggered by the phrase "OK, Google Now."
The Moto G will go on sale initially in Brazil and parts of Europe. Later this year, the phone will hit the rest of Latin America, Europe and Canada, not reaching the U.S., India, the Middle East and Asia until January.
Smartphone sales are projected to hit 1.7 billion in 2017 from 1 billion this year, driven by growth in emerging markets and under-$200 handsets, according to International Data Corp. Both the Moto X and Apple’s new iPhones targeted the higher end smartphone market, as opposed to the Moto G.
A better seller?
Part of the problem with the Moto X was that Google allowed only AT&T (T) customers to use the "Moto Maker" website to personalize their phones by, for example, choosing from among 18 colors for the back. Only this week did Google open the personalization feature to customers of Verizon Wireless (VZ), Sprint (S) and T-Mobile US (TMUS). Motorola CEO Dennis Woodside said on Wednesday sales of the X have picked up in the few days since the AT&T exclusive ended.
While Google stuck to its AT&T exclusive, Apple (AAPL) offered its new iPhone 5C in five colors at all the U.S. carriers. About one-quarter of Apple customers picked up the 5C, even though it’s an almost unchanged version of last year’s flagship iPhone 5, according to market surveys.
Apple said it sold 33.8 million iPhones in the third quarter, up from 26.9 million a year earlier.
Google was mum about how many Moto X phones it sold in the quarter, with analysts estimating 500,000 to 1 million units shipped.
The net operating loss at its Motorola unit rose to $248 million from $192 million a year earlier after excluding restructuring charges and stock compensation costs. Revenue plummeted to $1.1 billion from $1.8 billion a year earlier. Google paid $12.5 billion for Motorola last year, though the price was offset by $3 billion of cash at the acquired company and the later sale of a set-top box business for $2.4 billion.
Analysts have said Google needs to sell 5 million to 7 million Moto X phones to make a profit at the Motorola unit.
That looks increasingly unlikely this year. With help from the new lower-priced phone, investors will now look to 2014 for the turnaround.
- Information Technology
- Technology & Electronics