SHARING AMERICA'S TECH NEWS FROM THE VALLEY TO THE ALLEY
Enter the Moto X. Google hopes this phone, officially unveiled Thursday, will reboot the Motorola brand along with the namesake company it bought a year and a half ago. But the tech giant faces both long odds and a lot of questions about what its intentions in the smartphone market really are.
Several details about the mystery Moto X have leaked—most significantly from Google Executive Chairman Eric Schmidt, who took the liberty of offering a peek at the Allen & Co. conference in Sun Valley, Idaho, last month. Rumor has it Moto X will respond to voice commands without the user having to even touch it. And in a first for the industry, the smartphone will be assembled in the United States, in a Flextronics factory outside Fort Worth, Texas.
The problem, though, is that Moto X is destined to be a costly gamble for Google—whether it strikes a chord with consumers or not. That’s because from smartphones to their tablet cousins, the mobile market has high stakes. And lately some impressive companies have been losing.
Take Microsoft, for example. Its most committed partner in smartphones, Nokia, is lucky to eke out a profitable quarter at all these days, and Microsoft earlier this week said it will take a $900 million write-down for Surface tablets it couldn’t sell.
(Read more: Microsoft losing money on Surface tablets)
BlackBerry was king of the smartphone market (and arguably the planet’s fastest-growing company) as recently as four years ago. Now its latest BlackBerry 10 phones are slow to catch on with consumers, moving just 2.7 million units last quarter; the stock is deflating; and analysts are buzzing about its demise again.
The brutal thing about this market dynamic—and the thing that should worry the optimists at Google and Motorola a little—is that even good phones seem destined for mediocre returns these days, unless they’ve got an Apple or Samsung logo stamped on them.
Nokia’s high-end Lumias have the best cameras in the business, but they’re on track to ship fewer units all year than Apple does in a slow quarter. HTC’s new flagship phone, the One, garnered the most glowing reviews ever for an Android phone, but the company’s latest financial results have some questioning whether CEO Peter Chou will last.
Why? Mobile market researcher Chetan Sharma’s work offers some clues. He found that a few key factors influence whether a smartphone becomes a huge and profitable seller.
Among them: the quality of the device, consumer loyalty to the brand and the marketing firepower behind it.
The marketing piece is important—both Apple and Samsung spent upward of $300 million on marketing in 2012, Sharma found. That’s in the U.S. alone. And that, Sharma determined, is an often overlooked factor that lately has separated the dominant players from the pack even more.
So if Moto X is a long shot, it’s largely because it’s not clear how badly Google wants it to succeed. The search giant can afford to spend hundreds of millions of dollars marketing a phone. But will it? Unlike Apple and Samsung—companies who make their bones selling hardware—Google is a software company.
by John Fortt, courtesy CNBC
Really, Google’s got three main types of businesses. There are things like Search and YouTube, which make billions of dollars per year from advertising. Then there are things like Drive, News, Google and Android, which keep people in the Google fold where they’re more likely to search for something.
And then there are projects like Google’s driverless cars, which are “moon shot” ideas. They don’t make money. They don’t have many (or in some cases any) real users.
Motorola seems to be in a new category all its own. The company is a major money-loser: it drained $342 million from Google’s coffers last quarter alone. Motorola isn’t selling a lot of phones (at least not yet), so it’s not particularly useful for driving Google’s other products.
Making matters more complicated: Motorola competes with some of Google’s most important partners, including Samsung.
The key issue for Moto X’s success then probably isn’t the quality of the phone itself—it could be how much Google is willing to spend to create demand.
Thank you, TiA