Mozilla will release a $25 smartphone in India and Indonesia by the end of this year, the The Wall Street Journal reports. The tech media's reaction is enthusiastic to say the least -- Time, for example, calls the phone a "brilliant gamechanger" -- but is it really worth getting excited about? Let's assess.
The opportunity is there
Equipped with Firefox OS and low-priced chips from Spreadtrum Communications (NASDAQ:SPRD), Mozilla's smartphone indicates the company wants to shake up a market still dominated by feature phones.
IDC estimates these low-end devices -- also termed "dumbphones" because they lack smartphone features -- account for 71% of the Indian mobile environment and over half of the Indonesian space.
In India, which offers the most robust market data, Samsung (NASDAQOTH:SSNLF) sells 35% of all smartphones, according to the research firm. Micromax, an Indian company, follows the electronics giant with a 15% share. The remaining market is split between Nokia (NYSE:NOK), Karbonn, Lava, and a host of others.
Still, an opportunity exists for Mozilla. Because of its $25 price point, it can undercut these competitors. With all else constant, the new Mozilla smartphone will be priced similarly to many feature phones, and should be half as expensive as other smartphones, if not cheaper. Li Gong, Mozilla's chief operating officer, recently explained the strategy (via WSJ):
With a $25 price tag, there is no price gap between a smartphone and a feature phone.... This attractive price point would help motivate feature-phone users to switch to smartphones.
Per figures from MySmartPrice, a typical feature phone costs between 700 and 3,000 Indian rupees, or $12 to $50. The highest-priced "dumbphones," from companies like Nokia and Samsung, can cost twice that.
As you'd expect, smartphones are even more expensive. The online research platform reports the Samsung Galaxy S5 costs about 37,000 Indian rupees -- almost $625. The Nokia Lumia 1020 is priced near the equivalent of $700, while most offerings from Micromax, Karbonn, and Lava cost somewhere between $80 and $250.
The big question
These numbers suggest Mr. Gong's claims are correct. And by partnering with Indian brands Intex and Spice, Mozilla's smartphones shouldn't have any distribution trouble when they're released.
In addition to India and Indonesia, Mozilla has unveiled Firefox OS in Latin America and Europe with the help of ZTE and LG. Taiwan is also a market of interest now that the company has partnered with Chunghwa Telecom, the country's largest telecom operator.
So will Mozilla disrupt the smartphone industry? That remains to be seen, but at the very least, it should make an imprint.
Neil Mawston of Strategy Analytics recently told the Journal it's reasonable to expect a global operating system market share of 1% by the end of 2014. He says Mozilla's share could grow to 3% in the next four years. That's far behind what Mawston expects of Google's Android (77%) and Apple's iOS (16%) to finish the year with, but it's just two percentage points behind Microsoft.
The bottom line
From a user experience standpoint, Firefox OS has received modest reviews in its first two years of availability, and it's hard to see the downside of an open source platform. There's an argument to be made that Mozilla -- not Microsoft or BlackBerry -- is the industry's long-term No. 3 behind Apple and Google.
Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Apple and Google (C shares). The Motley Fool owns shares of Apple, Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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