The stakes are high for “Motorola – a Google
(NASDAQ:GOOG) company.” The market response to Moto X
, Motorola Mobility’s big bet flagship smartphone that was announced today, will signal whether the once renowned cellular phone maker could make a powerful comeback and get out of the red.
In 2011, Google pledged to pay about $12.5 billion to buy Motorola, thus joining the ranks of smartphone manufacturers. The company has had little success in this category so far, despite the domination of its Android OS in the global smartphone market.
Motorola Mobility has been bleeding money and losing employees since becoming part of Google in the spring of 2012. The mobile business has recognized $1.66 billion total in operating losses since then, without a single profitable quarter. The company's headcount was trimmed roughly fivefold, from 20,293 to 4,599.
Motorola Mobility has been consistently reducing its global presence, dropping one market after another
, and giving up control of its manufacturing plants. But even these moves didn’t help the company remain afloat on its home turf. Its Droid line didn’t seem to strike the fancy of American customers, and shipments declined quarter after quarter
Moto X might be the savior the company desperately needs. Promoted under a “Made in the US” banner, the device will be “the first smartphone designed, engineered, and assembled in the USA,” as the company puts it
Motorola Mobility CEO Dennis Woodside said
that 70% of the device will be assembled in a Fort Worth, Texas, factory run by Motorola’s manufacturing partner Flextronics
(NASDAQ:FLEX), a global contract electronics maker headquartered in Singapore.
But will the appeal to patriotism and an enormous $500 million marketing budget
prompt consumers to pay $199 on contract for the device? Except for its slim and sleek design and signature curvy back, Moto X doesn't offer much in the way of special features; it is hardly worthy of a gadget-to-die-for label.
Moto X features a 4.7-inch AMOLED 720p display and 10 megapixel main camera, and it uses Motorola’s X8 set of chips. It essentially combines a couple of different processors “under the one hood,” but most of its power comes from Qualcomm’s
(NASDAQ:QCOM) Snapdragon S4 Pro running at 1.7 GHz, which is similar to the processors used in the updated Nexus 7 tablet and the Droid smartphones Motorola announced in July
Moto X comes in two versions, with 16GB or 32GB of storage that's not expandable (two years of free 50GB on Google Drive is included as bonus). The promised battery life is up to 24 hours.
While the hardware itself is solid, it’s far from being impressive. A number of similar or faster devices are already on the market, including Samsung's
(OTCMKTS:SSNLF) heavyweight Galaxy S4.
As for its software, Moto X runs Android 4.2.2 and offers Active Display updates (important notifications appear on the screen even if the device is not fully powered), Touchless Control (the phone is always "listening" for voice commands), and an improved camera application.
The personalization options look promising, to say at least: Users can customize the color on the front and back of the phone and will have thousands of shades to choose from. The company is also working on a back made of wood. Customers can also choose the type of edges the phone will have and the color of the volume buttons, and they can still have the phone delivered within the US for free in four days or less. However, whether customization options will have an impact on sales is uncertain.
Moreover, pressure from the upcoming Apple
(NASDAQ:AAPL) iPhones -- not to mention current Android flagships from Samsung, Sony
(NYSE:SNE), and HTC
(TPE:2498) -- might seriously hurt Moto X sales, which begin in late August in the US.
So could a single "Made in the US" phone model save the ailing company and bring Google something more than just a boost to its patent portfolio and poor financials? At least Motorola has already saved its own reputation with the the RAZR line-up,
first released about a decade ago, and Moto X looks like a sound attempt at a comeback, anyway.
Google's stock price rose nearly 2% to $904.22 today (August 1) after this news was announced.
No positions in stocks mentioned.