Motorola's Moto X is back in the news: Subscribers on all major US carriers can now access Motomaker, Motorola's website that lets buyers customize the look of their phones before purchasing. Hopefully for Google's (NASDAQ:GOOGL) investors, that leads to an uptick in sales -- so far, the Moto X appears to have been a disappointment.
Prior to its release, expectations for the Moto X were running high. As early as last December, The Wall Street Journal characterized Google's forthcoming "X phone" as a super handset that would challenge flagship devices from market leaders Samsung (NASDAQOTH: SSNLF) and Apple (NASDAQ:AAPL). Yet, that was not to be -- the Moto X appears to have floundered.
Evidently, custom colors and "made in America" doesn't sell
I also expected the Moto X to sell well. Given its sub-par specs, I didn't think that it should, but I assumed that a superficial, custom paint job combined with an advertising campaign designed to tap the "buy American crowd" would result in the phone being one of the hottest handsets of the year.
Exact sales data has yet to be released, but signs suggest that demand for the phone has been tepid. Back in September, Google told Reuters that just 100,000 Moto Xs were being shipped per week. For comparison, Samsung shipped 20 million Galaxy S4s within two months; Apple sold 9 million iPhone 5s and iPhone 5c units in the first weekend.
In October, the plant in Texas making the Moto X fired about 200 workers (a full shift), according to the local Fox 4 news. Although the jobs were temporary, they were reportedly supposed to last well into next year.
But perhaps the most damning evidence against the Moto X is the price cut. Initially, Google's smartphone sold for $199 on a contract -- it was cut to just $99 on Monday. Generally, such rapid price cuts are reserved for disappointing phones -- Samsung's competing Galaxy S4 is about 7 months old, but still sells for $199.
Samsung maintains control over Android
That's key, as Samsung's Galaxy S4 remains the premiere smartphone running Google's mobile operating system. More than just reverse the losses that have plagued the Motorola division, Google had a strategic interest in seeing the Moto X be successful -- it needs another popular Android handset to balance out Samsung's dominance.
Earlier this year, The Wall Street Journal reported that Google's executives had grown uneasy with Samsung's position. By some estimates, about half the Android devices in existence have been made by Samsung, and the Korean giant could use its dominance to exert control over Google's platform -- pushing its own app store, removing Google's services, or even forking Android entirely.
Certainly, Samsung appears to be moving to distance itself from its Android rivals. Last month, the company held its first developers conference, where it unveiled software tools designed to get Android developers focusing on Samsung hardware.
Reports hint at disappointing iPhone 5c demand
Arguably, Apple's iPhones operate in a different market from the Moto X -- loyal iPhone owners, ensnared by Apple's ecosystem, may not even consider making the switch. Still, the Moto X's apparent struggles run parallel to Apple's experience with the iPhone 5c.
Investors will have to wait until Apple's next earnings report to get a better look, but reports suggest that the iPhone 5c -- the cheaper, more colorful version -- may not be selling as well as Apple had anticipated. Several reports have indicated that Apple has cut its supply chain orders for the iPhone 5c, while several retailers, including Wal-Mart, have offered the phone at a discount.
Assuming that the iPhone 5c is performing worse than expected, one reason may have been an overestimation of the importance of color. Like Google hoping to sell the Moto X largely on its customizable, colorful look, Apple may have believed (incorrectly) that colored plastic was enough to win over consumers.
Will Motorola bleed Google dry?
Since 2011, when Google first acquired Motorola, the company has consistently bled cash. Last quarter alone, it cost Google $250 million -- worse than the $218 million loss it reported in July. If Motorola could just break-even, it would increase Google's earnings by more than 8%.
Yet, I wouldn't expect that anytime soon. Certainly, Google's phone doesn't appear to be selling as well as phones from Samsung and Apple. Expanding to the other carriers, and cutting the price, could help to boost sales, but any Google investors banking on a resurgent Motorola division should certainly temper their expectations.