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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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