Print 18 comment(s) - last by Kazinji.. on Jan 5 at 10:34 PM

Android Kit Kat smartphone is priced to sell

In Q3, Google Inc. (GOOG) subsidiary Motorola Mobility saw slow sales of its flagship Moto X smartphone.  The slow sales come at a time when all premium handsets sales were seeing a slowdown -- even Samsung Electronics Comp., Ltd. (KSC:005930) and Apple, Inc. (AAPL).
But the slump hit Motorola harder than most; it moved only around 500,000 units of the smartphone, versus 10 million Samsung Galaxy S4s sold during the quarter, according to Strategy Analytics. 
Part of the blame could lie on the hardware -- the Moto X features a 720p screen when many rival devices like the Samsung Galaxy S4 pack 1080p, and the processor is a last-generation Qualcomm Inc. (QCOM) Snapdragon S4 Pro, not a Snapdragon 600 or 800 chip.  Or you could blame the price point.  While the $579 USD off-contract introductory price wasn't horrible, the phone was poorly subsidized costing $199 USD with 2-year contract on AT&T, Inc. (T).
Looking to revive slumping sales Google its subunit offered up flash sales over $349 USD over the holiday shopping season.
Encouraged by the results, they have now dropped the price of an unlocked handset to $399 USD (for the 16 GB model.  AT&T likewise has lopped $100 off its price, offering the 16 GB for $99 USD with new two-year contract.  The new prices include the phone's trademark customization, including custom backplate colors, headphone colors, volume button colors, and boot-up greeting screens.
Moto X
With the cuts the contract price still seems to be a bit high but the off-contract price is one of the best deals you can get (although, of course, not quite as good as the holiday special price).

At that price Motorola still has about a 50 percent profit margin according to Tech Insights, alhtough part of that is eaten up by assembly costs.  The parts in the phone cost about $200 USD, according to Tech Insights.  The Moto X is assembled at a Motorola Mobility factory in Fort Worth, Texas, as noted in its proud "Designed and Assembled in the USA" advertisement.  That means that even if Google runs afoul of rulings in the patent wars, its competitors are unable to be able to ban the device (as the typical route is to ban imports from China).

By contrast Samsung's Galaxy S4 is about identical, thanks in part to savings Samsung enjoys by being the sister company of its display vendor.  But in the U.S. it pays an estimated $300 USD for the phone, given the addition of a Snapdragon 600 versus its own in-house Exynos octacore chip (featured in the Korean model).  Samsung also has to worry about import bans as the phone is imported from manufacturing sites in South Korea and Vietnam.

Moto X

The Developer Edition was also cut in price to $449 USD.  Both the standard and Developer models were among the first flagship phones in the U.S. to receive the latest and greatest build of Android, Android "Kit Kat" 4.4.

It should be noted that the premium bamboo wood trim option is excluded from the new lower off-contract price point.

But for those taking the dive you may be in for a pleasant surprise.  Its near-stock build of Android and its decision to eschew the "jumbo" form factors its competitors have gravitated towards have earned it praise.  AnandTech smartphone reviewer Brian Klug wrote of the phone:

The Moto X does a lot of things right – the size, shape, stock UI, customization. I enjoy using the Moto X a lot more than I thought I would, and think Motorola hit a home run with the Moto X in the size and shape department... At the right price the Moto X could be a very big deal, almost disruptive. It's just a matter of getting it there.

Up against the Galaxy S4's (16 GB) $599 USD and the iPhone 5S (16 GB) off-contract stickers, the Moto X at $399 USD starts to look like a hot buy.  It certainly looks like it's getting there.

Sources: Motorola, WSJ

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So its priced in line with the Nexus 5
By stm1185 on 1/2/2014 3:40:03 PM , Rating: 4
Which hopefully will become the norm. Price competition on hardware instead of the Apple fixed rate.

RE: So its priced in line with the Nexus 5
By GulWestfale on 1/2/2014 4:07:00 PM , Rating: 2
lower prices are always good, but this still looks expensive next to a nexus 5.

By Reclaimer77 on 1/2/2014 4:24:44 PM , Rating: 2
Go read the Anandtech writup of the Moto X.

It stacks up pretty well with the Nexus 5. Probably beats it on performance.

I believe the Moto X is still the only smartphone using the Flash file system. It boasts the best I/O performance by a wide margin, even when the storage is filled up.

RE: So its priced in line with the Nexus 5
By retrospooty on 1/2/2014 4:25:25 PM , Rating: 2
It's still a great price. Spec-wise its below the Nexus 5 but it has other optimizations and customizations that make it worthwhile at $399. $399 is where they should have started it.

By Kazinji on 1/5/2014 10:34:44 PM , Rating: 2
Think the higher price pt was to ensure quality control. All the new customizations and new factory? or line to build it in Texas. The higher price was to ensure that it wasn't flying off the shelves and quality drops below what they think they can handle. Now that they are little more use to it all of it and gotten any bugs out drop the price and see them fly out the door.

RE: So its priced in line with the Nexus 5
By Nutzo on 1/2/2014 4:31:53 PM , Rating: 2
The price is defiantly headed in the right direction.
Picked up a couple 16GB Nexus 4’s for the family when they had them on sale for $249
That was a good price.

I don’t need the latest and greatest expensive phones, my S3 and the Nexus 4’s are good enough.
Now that I'm saving a lot of money on the a low cost family plan with T-Mobile, I’ll also be looking for cheaper phones when I need to replace one.

By retrospooty on 1/2/2014 5:22:34 PM , Rating: 2
Yup... The Moto G on Verizon is now $99 no contract. Freegin amazing price. If big red V is doing it, the rest will follow suit soon. It was good at the announced $179 no contract, but $99? A Game changer for alot of people. That is going to be the standard pay as you go plan.

RE: So its priced in line with the Nexus 5
By melgross on 1/2/14, Rating: 0
By retrospooty on 1/3/2014 9:18:19 AM , Rating: 3
Of course it didn't. When it was unreleased, everyone expected it to be priced like the Nexus line. When the final specs came out they re-iterated that thought. When it was finally released and priced like a high end device it had very little justification for it. Now it is priced where it should have been all along.

Profits, where?
By melgross on 1/2/2014 7:33:07 PM , Rating: 2
I doubt if Moto is making much profit on this now. I see too many articles that equate parts cost, where they are just guessing anyway, because they don't know the contract prices manufacturers are paying, with overall costs. If a device has $200 in parts, total cost is closer to $350, possibly more.

These companies that do these estimates consistently refuse to believe that it costs money to keep a company running. Salaries, R&D, electricity, heating, light bulbs, warrantee costs, packaging costs, shipping costs, and many others have to be taken into account when pricing an item.

And then there is the cut retailers must have. So that can be anywhere from 20% to 50%.

They may even be losing money on this now.

RE: Profits, where?
By flyingpants1 on 1/3/2014 12:26:43 AM , Rating: 2
Lol what? What reason do you have to doubt bill of materials estimates? The cost to build iPhones and Galaxy S phones has been estimated at around $100-250 every single year.

Nexus 4 was $299, Nexus 5 is $349, at break-even or a slight profit. Moto X has a cheaper screen, SOC, battery, camera.. etc. $400 is utterly ridiculous for this phone. Of course they are making a profit on it.

RE: Profits, where?
By Reclaimer77 on 1/3/2014 12:34:21 AM , Rating: 2
Apple and Samsung get huge discounts for volume. Plus Samsung can make their own components.

Motorola simply cannot make a phone with the same margins as the big players, no way. Especially not one made in America.

RE: Profits, where?
By melgross on 1/3/2014 11:20:10 AM , Rating: 2
Did you read more than the first sentence of what I wrote? It doesn't seem as though you did.

The cost of the parts are just that. Do you think that device cost equals the cost of parts? If so, you have a lot to learn. I was an electronics manufacturer, and I can assure you that it isn't so. Read the post again.

You are confusing the cost of the parts with the total cost. That's easy to see, as you are stating that the cost to build these devices is what the cost of parts are. You are forgetting that there is a lot more to running a company than parts costs and assembly costs.

RE: Profits, where?
By ven1ger on 1/3/2014 2:44:47 PM , Rating: 2
I think most people understand there is overhead when in any business which has to be added into the cost of doing business. That doesn't mean that you can't break down the cost of an item to its component parts to get at least a breakdown into the cost to manufacture said item then add in the additional for the overhead. All business have to factor in cost of goods, overhead and how many they expect to sell to come up with a price. If they expect to sell fewer units that means the pricing will be higher than if they expect to sell fewer units, and also what sort of profit margin are they seeking for these units.

RE: Profits, where?
By flyingpants1 on 1/3/2014 10:43:19 PM , Rating: 2
Did you read more than the first sentence of what I wrote? It doesn't seem as though you did.

If so, you have a lot to learn.

I was an electronics manufacturer, and I can assure you that it isn't so. Read the post again.

Well it's great that you know so much, but if you're able to put your condescension aside for a minute, you'll notice I didn't actually say anything like that.

I think there's still plenty of room for margins, I doubt the overhead is anywhere near that huge. I hope that's more clear.

By StormyKnight on 1/3/2014 12:20:18 AM , Rating: 3
I designed one online with Motomaker last November to replace my Galaxy Nexus. Third day after I ordered it, it was overnighted FedEx and showed up on my doorstep by 9:30am.

I have been very happy with the phone. I've played around with my in-law's S3 and my brother's S4 and I can say that the Moto X is every bit as nice if not nicer since there is really no discernable skinning to the UI. It is about as vanilla as Android gets outside of a Nexus.

A few people might poo poo the 720p resolution, but I honestly don't see a difference between the Moto X screen and that of the S3 or S4. Heck, I don't see much of a difference between my Moto X and my 2013 Nexus 7.

I do have to say after the Kit Kat update, the battery life has taken a hit. I can still go through a day without having to bring a charger with me unlike my GNex, but it does drain faster now. No ignoring that.

All in all, I love this phone. It is snappy and quick and, thank Motorola, has a LOUD speaker like my OG Droid. The Gnex had an anemic battery that made it near impossible to hear the audio when watching any streaming video. Glad to be back in the Motorola fold. Sorry Samsung, you lost a customer.

RE: Surprised
By StormyKnight on 1/3/2014 12:21:45 AM , Rating: 2
*anemic speaker, not battery.

competition is great!
By blueaurora on 1/2/2014 5:22:03 PM , Rating: 2
I support price competition directly. Bought two yesterday. 900 plus tax for two 32 GB models hurt but that is a nice phone and nobody builds like moto. Formerly happy maxx user.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke

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