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Is Google Taking a Page from Nokia's Book?

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Seemingly never content, Google (NASDAQ: GOOGL  ) isn't shy about introducing new gadgets and technologies. From floating data centers to Internet balloons and self-driving cars, Google reigns supreme as an innovator. But innovation isn't the only attribute Google brings to the table: It's also willing to take on established players in hyper-competitive markets.

When Google unveiled its Moto X smartphone, it was designed to play in the upper echelon of the market, right alongside the Lumia from Nokia (NYSE: NOK  ) and Apple's iPhone lineup. Heady stuff for Google's first homespun offering from its Motorola unit. Now, rumor has it, Google is about a week away from unveiling a low-end smartphone called the Moto G, competing directly with Nokia's successful Asha phones and bottom rung Lumia's.

Nokia's world
When Nokia, and, by extension, Microsoft (Nasdaq: MSFT), announced Q3 earnings results on Oct. 29 after announcing a $7.2 billion offer to buy Nokia's devices and services business, much of the focus was on its smartphone sales, and rightfully so. After posting Lumia sales of 8.8 million units, investors were understandably excited. The Lumia lineup is beginning to gain traction, as evidenced by a 40% improvement from the year-ago period and a 19% jump sequentially.

But somewhat lost in all the good Lumia tidings were a couple of interesting tidbits. One, much of the growth in Lumia sales came, by Nokia's own admission, from its lower-end Lumia 520. At $99.95 on without a contract, that's one inexpensive smartphone.

Another factoid that flew under the radar was Nokia's 4% jump in mobile phone sales sequentially in Q3, due in large part to its Asha lineup. Not all countries enjoy big mobile carrier subsidies, so the lower-end phones open the door to big opportunities for device makers willing and able to tap into overseas markets. And with built-in social integration, email and Internet capabilities, the line between Nokia's (and other manufacturers) feature phones and smartphones is becoming fuzzier every day.

Google's turn
Though Google's first foray into building its own phone, the Moto X, has turned out only so-so -- they were shipping about 100,000 a week a short while ago -- as Nokia can attest, it takes a while to make a dent in the saturated mobile phone market. Samsung and Apple certainly aren't ready to concede anything to Google, or anyone else.

Rather than call it a day, it appears Google is going to take a page from Nokia's book and will release a low-cost smartphone alternative called the Moto G. In a not-so-subtle slip, Google "accidentally" posted a navigation menu tab for Moto G about a week ago. Since then, Google has sent out invitations to a Nov. 13 Moto G event, where it is widely expected to announce the Moto G is, in fact, a low-cost smartphone alternative.

It will be interesting to see what the Moto G is initially priced at, particularly after the cost of the Moto X has already been cut in half, to $99.99, with a contract. By comparison, some of the top Lumia's from Nokia are also in the $99 range, with a contract. We'll also need to wait and see if the Moto G can be customized like the Moto X, and if it will be built in the U.S., a big selling point for Google's first Motorola smartphone.

No word on when, or if, Google intends to use Motorola to dive into the phablet market as Nokia did with its new Lumia 1520, boasting a 6-inch screen and all the usual goodies you'd expect from a high-end smartphone. But first things first for Google.

It's a sound move for Google and its investors to use its Motorola unit for more than its patent portfolio. Google has the financial wherewithal to build its in-house mobile device lineup over time, and with its world-leading Android OS, it certainly understands the market. The Moto G is yet another example of why Google is becoming such a dominant force.


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