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Worldwide mobile phone sales to end users totaled 435 million units in the second quarter of 2013, an increase of 3.6 percent from the same period last year, according to Gartner, Inc. Worldwide smartphone sales to end users reached 225 million units, up 46.5 percent from the second quarter of 2012. Sales of feature phones to end users totaled 210 million units and declined 21 percent year-over-year.
“Smartphones accounted for 51.8 percent of mobile phone sales in the second quarter of 2013, resulting in smartphone sales surpassing feature phone sales for the first time,” said Anshul Gupta, principal research analyst at Gartner. Asia/Pacific, Latin America and Eastern Europe exhibited the highest smartphone growth rates of 74.1 percent, 55.7 percent and 31.6 percent respectively, as smartphone sales grew in all regions.
Samsung maintained the No. 1 position in the global smartphone market, as its share of smartphone sales reached 31.7 percent, up from 29.7 percent in the second quarter of 2012. Apple’s smartphone sales reached 32 million units in the second quarter of 2013, up 10.2 percent from a year ago.
In the smartphone operating system (OS) market, Microsoft took over BlackBerry for the first time, taking the No. 3 spot with 3.3 percent market share in the second quarter of 2013. “While Microsoft has managed to increase share and volume in the quarter, Microsoft should continue to focus on growing interest from app developers to help grow its appeal among users,” said Mr. Gupta. Android continued to increase its lead, garnering 79 percent of the market in the second quarter.
Mobile Phone Vendor Perspective
Samsung: Samsung remained in the No. 1 position in the overall mobile phone market, with sales to end users growing 19 percent in the second quarter of 2013 (see Table 3). “We see demand in the premium smartphone market come mainly from the lower end of this segment in the $400-and-below ASP mark. It will be critical for Samsung to step up its game in the mid-tier and also be more aggressive in emerging markets. Innovation cannot be limited to the high end,” said Mr. Gupta.
Nokia: Slowing demand of feature phone sales across many markets worldwide, and fierce competition in the smartphone segment, affected Nokia’s mobile phone sales in the second quarter of 2013. Nokia’s mobile phone sales totaled 61 million units, down from 83 million units a year ago. Nokia’s Lumia sales grew 112.7 percent in the second quarter of 2013 thanks to its expanded Lumia portfolio, which now include Lumia 520 and Lumia 720. “With the recent announcement of the Lumia 1020, Nokia has built a wide portfolio of devices at multiple price points, which should boost Lumia sales in the second half of 2013,” said Mr. Gupta. “However, Nokia is facing tough competition from Android devices, especially from regional and Chinese manufacturers which are more aggressive in terms of price points.”
Apple: While sales continued to grow, the company faced a significant drop in the ASP of its smartphones. Despite the iPhone 5 being the most popular model, its ASP declined to the lowest figure registered by Apple since the iPhone's launch in 2007. The ASP reduction is due to strong sales of the iPhone 4, which is sold at a strongly discounted price. “While Apple’s ASP demonstrates the need for a new flagship model, it is risky for Apple to introduce a new lower-priced model too,” said Mr. Gupta. “Although the possible new lower-priced device may be priced similarly to the iPhone 4 at $300 to $400, the potential for cannibalization will be much greater than what is seen today with the iPhone 4. Despite being seen as the less expensive sibling of the flagship product, it would represent a new device with the hype of the marketing associated with it.”
Lenovo: Lenovo’s mobile phone sales grew 60.6 percent to reach 11 million units in the second quarter of 2013. Lenovo’s quarter performance was bolstered by smartphone sales. Its smartphone sales grew 144 percent year-over-year and helped it rise to the No. 4 spot in the worldwide smartphone market for the first time. Lenovo continues to rely heavily on its home market in China, which represents more than 95 percent of its sales. It remains challenging for Lenovo to expand outside China as it has to strengthen its direct channel as well as its relationships with communications service providers.
“With second quarter of 2013 sales broadly on track, we see little need to adjust our expectations for worldwide mobile phone sales forecast to total 1.82 billion units this year. Flagship devices brought to market in time for the holidays, and the continued price reduction of smartphones will drive consumer adoption in the second half of the year,” said Mr. Gupta.
Additional information is in the Gartner report "Market Share Analysis: Mobile Phones, Worldwide, 2Q13." The report is available on Gartner's website at gartner.com ###
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>> Qualcomm Snapdragon 800 Processors - Revolutionizing Mobile Imaging
Tuesday, August 20, 2013 1AM EDT | 10am PDT
The smartphone has taken the place of our dedicated camera devices and our video camcorders. This revolution is now being led by the Imaging capabilities of Qualcomm Snapdragon processors. The Snapdragon 800 processor, powering camera-centric commercial devices launching later this year, possess the unique hardware, software and efficient processing capacity to deliver leading edge Camera capabilities, including:
• Dual ISP for picture-in-picture applications • Ultra-high throughput for zero shutter lag and high-speed burst capture • Highly flexible pre-and post ISP processing
Join us for an update on the mobile Imaging industry and insight from our resident expert on how Snapdragon processors are leading the mobile Imaging revolution, from digital still photography to camcorder technology and all the features in between.
Speaker: Tim Yates, Senior Director, Product Management ###
Mark Zuckerberg, founder and CEO of Facebook, today announced the launch of internet.org, a global partnership with the goal of making internet access available to the next 5 billion people.
"Everything Facebook has done has been about giving all people around the world the power to connect," Zuckerberg said. "There are huge barriers in developing countries to connecting and joining the knowledge economy. Internet.org brings together a global partnership that will work to overcome these challenges, including making internet access available to those who cannot currently afford it."
Today, only 2.7 billion people – just over one-third of the world's population -- have access to the internet. Internet adoption is growing by less than 9% each year, which is slow considering how early we are in its development.
The goal of Internet.org is to make internet access available to the two-thirds of the world who are not yet connected, and to bring the same opportunities to everyone that the connected third of the world has today.
The founding members of internet.org -- Facebook, Ericsson, MediaTek, Nokia, Opera, Qualcomm and Samsung -- will develop joint projects, share knowledge, and mobilize industry and governments to bring the world online. These founding companies have a long history of working closely with mobile operators and expect them to play leading roles within the initiative, which over time will also include NGOs, academics and experts as well. Internet.org is influenced by the successful Open Compute Project, an industry-wide initiative that has lowered the costs of cloud computing by making hardware designs more efficient and innovative.
In order to achieve its goal of connecting the two-thirds of the world who are not yet online, internet.org will focus on three key challenges in developing countries:
Making access affordable: Partners will collaborate to develop and adopt technologies that make mobile connectivity more affordable and decrease the cost of delivering data to people worldwide. Potential projects include collaborations to develop lower-cost, higher-quality smartphones and partnerships to more broadly deploy internet access in underserved communities. Mobile operators will play a central role in this effort by driving initiatives that benefit the entire ecosystem.
Using data more efficiently: Partners will invest in tools that dramatically reduce the amount of data required to use most apps and internet experiences. Potential projects include developing data compression tools, enhancing network capabilities to more efficiently handle data, building systems to cache data efficiently and creating frameworks for apps to reduce data usage.
Helping businesses drive access: Partners will support development of sustainable new business models and services that make it easier for people to access the internet. This includes testing new models that align incentives for mobile operators, device manufacturers, developers and other businesses to provide more affordable access than has previously been possible. Other efforts will focus on localizing services – working with operating system providers and other partners to enable more languages on mobile devices.
By reducing the cost and amount of data required for most apps and enabling new business models, Internet.org is focused on enabling the next 5 billion people to come online.
Facebook, Ericsson, MediaTek, Nokia, Opera, Qualcomm, Samsung and other partners will build on existing partnerships while exploring new ways to collaborate to solve these problems.
"For more than 100 years, Ericsson has been enabling communications for all and today more than 6 billion people in the world have access to mobile communications,” said Hans Vestberg, President and CEO of Ericsson. "We are committed to shaping the Networked Society – where everyone and everything will be connected in real time; creating the freedom, empowerment and opportunity to transform society. We believe affordable connectivity and internet access improves people's lives and helps build a more sustainable planet and therefore we are excited to participate in the internet.org initiative.”
“As a world leader in mobile solutions for emerging markets having powered more than 300 million smart devices within 2 years, MediaTek whole heartedly supports the internet.org initiative.” said MK Tsai, Chairman of MediaTek. “Global Internet and social media access represent the biggest shift since the industrial revolution, and we want to make it all-inclusive.”
“Nokia is deeply passionate about connecting people – to one another and the world around them,” said Nokia President and CEO Stephen Elop. “Over the years, Nokia has connected well over a billion people. Our industry is now at an exciting inflection point where Internet connectivity is becoming more affordable and efficient for consumers while still offering them great experiences. Universal internet access will be the next great industrial revolution.”
“Today, more than 300 million people use Opera every month to access the Internet. Tomorrow, we have a chance to serve the next 5 billion people connecting on mobile devices in developing countries. It’s in Opera’s DNA to save people time, money and data, and through internet.org we think we can help advance these goals.” -- Lars Boilesen, CEO Opera Software.
“Mobile has helped to transform many people’s lives in the emerging regions where often a computing device will be the first and only mobile experience they’ll ever have” said Paul Jacobs, chairman of the board and CEO of Qualcomm Incorporated. “Having shipped more than 11 billion chips, Qualcomm is a market leader that is committed to the goal of bridging the digital divide. We’re pleased to be a part of internet.org and to be working with key ecosystem players to drive this initiative forward.”
“This new initiative has big potential to help accelerate access to the Internet for everyone,” said JK Shin, CEO and President of the IT & Mobile Communications Division at Samsung Electronics. “We’re focused on delivering high quality mobile devices to ensure that the next five billion people have great mobile Internet experiences.”
The Internet.org website launches today and provides an overview of the mission and goals, as well as a full list of the partners. In the coming weeks, it will feature interviews with technology leaders and experts, along with the latest news on Internet.org activities.
The latest smartphone sales data from Kantar Worldpanel ComTech, for the three months to June 2013, show Apple’s iOS has surged 5.2 percentage points to 30.5% of the British smartphone market, driven by first-time smartphone buyers opting for the iPhone 4.
Dominic Sunnebo, global strategic insight director at Kantar Worldpanel ComTech, comments: “Although the flagship iPhone 5 was widely credited with boosting Apple’s global results last week, much of the market share growth for iOS in Britain is thanks to the competitively priced iPhone 4 attracting first time smartphone buyers. More than a third of iPhone 4’s sold were to consumers who have never owned a smartphone before, compared with just one in 10 new customers buying the iPhone 5.
“Margins are tighter at the entry-level end of the market, but as consumers become more engaged with their smartphone they are increasingly prepared to invest more when they upgrade. Apple boasts the highest level of customer loyalty of the operating systems, and by capturing consumers at entry-level it is in a good position to grow its customer base in the future. With almost 19 million feature phone owners left in Britain, there is still a lot for iOS and the other platforms to compete for.”
Despite the resurgence of iOS, Android continues to hold the number one spot in Britain with 56.2% of the market. This is also true across the five major European markets¹ where Android accounts for 69.8%, up from 64.5% a year ago, and in the USA where the platform has a 51.5% share, down from 52.6%.
¹ Great Britain, Germany, France, Italy and Spain (EU5)
Windows Phone continues to consolidate its position as the third OS globally, with strong performances in Britain and France where it has 8.6% and 9.0% of the market respectively. However, its share in the important US market has dipped slightly from 4.6% in the three months to May to 4% now.
Sunnebo continues, “While flagship Windows handsets such as the Nokia 925 and HTC 8X grab the headlines, it is the low and mid-range models, such as the Nokia Lumia 520 and 620, which are quietly driving its momentum. It is vital for Windows to be seen as a mainstream alternative to Android and iOS rather than a niche platform. Selling large volumes of lower end smartphones is a good way of getting Windows seen in the hands of potential customers’ friends and family, convincing them there isn’t a risk in choosing the operating system. The majority of people are trend followers, not trend setters, so Windows needs to get as many smartphones to market as quickly as possible.”
Smartphone penetration in Great Britain stands at 65% in June, with 87% of devices sold in the past three months being smartphones. ###
The latest smartphone sales data from Kantar Worldpanel ComTech, for the three months to July 2013, shows Windows Phone has posted its highest ever level of 8.2% across the five major European markets¹, emerging as a key player in the smartphone race.
¹ The big five European markets (EU5) includes UK, Germany, France, Italy and Spain.
Dominic Sunnebo, strategic insight director at Kantar Worldpanel ComTech, comments: “Android and Apple take the lion’s share of the headlines and continue to dominate smartphone sales, so it’s easy to forget that there is a third operating system emerging as a real adversary. Windows Phone, driven largely by lower priced Nokia smartphones such as the Lumia 520, now represents around one in 10 smartphone sales in Britain, France, Germany and Mexico. For the first time the platform has claimed the number two spot in a major world market, taking 11.6% of sales in Mexico.”
Windows Phone’s growth isn’t coming from stealing Apple or Android consumers. Only 27% of Apple and Android users change their OS when they replace their handset, and those that do switch tend to move between the two big operating systems.
Dominic continues: “Windows Phone’s success has been in convincing first time smartphone buyers to choose one of its devices with 42% of sales over the past year coming from existing featurephone owners. This is a much higher proportion than Android and iOS. The Lumia 520 is hitting a sweet spot, offering the price and quality that new smartphone buyers are looking for.
“Featurephone owners present a huge opportunity, representing more than half of all mobile users globally² and this will be the new battleground over the next year. With the iPhone 4 and lower end or older Samsung Galaxy models selling well among first time smartphone owners, there is plenty of competition for these customers. The brands that win in this segment will be those that understand and address the needs of consumers in terms of price, content, and quality.”
² Global refers to USA, Brazil, Mexico, Argentina, UK, France, Italy, Spain, Germany, Australia, Japan and China.
Globally, Apple and Android continue to dominate sales, but there are interesting regional patterns emerging. Android is far stronger across the major European markets and China where it accounted for around 70% of smartphone sales during the past quarter.
Apple continues to perform very well in the USA where it has grown its share to 43.4% of sales. It is also continuing to show strong year on year growth in Britain, France and Mexico. Sunnebo explains: “Apple and Android must focus on a balance between retaining existing customers and attracting featurephone owners to trade up if they want to continue their success over the next year.”
Following a difficult year, BlackBerry now accounts for just 2.4% of sales across the big five European markets* and 1.2% in the United States.
Smartphone % penetration in Great Britain stands at 66% in July, with 85% of devices sold in the past three months being smartphones. ###
Kantar Worldpanel data, released today, shows that, in the three months to the end of July 2013, Windows Phone devices made up 8.3% of smartphone sales unit volumes in the EU5 (Germany, UK, France, Italy, and Spain), the highest ever level for the platform. Windows Phone also reached a record share of smartphone sales in Mexico (12%), taking second place behind Android, but ahead of BlackBerry and iOS, the first time this has happened in a market of significant size.
In the UK and France, Windows Phone more than doubled its sales market share over the same period last year (4.2% to 9.2% and 3.6% to 11% respectively). Together with strong results from Germany, these figures saw Windows Phone's smartphone sales share increase from 4.3%, in the same period last year, to 8.2% this year.
In the news story for the last set of Kantar data we said that there was some evidence that the growth of Windows Phone sales was slowing down in Europe, noting that the increase in sales unit share in the EU5 for Windows Phone was 0.9% in the first quarter versus 0.4% in the second quarter. However, that no longer appears to be the case, with the increase (1.ma3%) in market share between the June data (6.9%) and July data (8.2%) being the same as the previous six months combined, something that points towards strong sales of Windows Phone devices in July.
However, sales in the US were relatively poor at 3.5% market share compared to earlier in the year, although the figure remain ahead of the same period last year. Windows Phone's figures in the US should see some improvement in the next few months, with the launch of the Lumia 928 and 1020, together with wider availability for the Lumia 520 and 925, likely to have a noticeably positive impact. Sales in China were also weak dropping to 2.4% sales share from 4.6% the previous year, suggesting Windows Phone is failing to find traction in the Chinese market.
Windows Phone is still a relatively small player compared to iOS and Android (17.9%, 69.1% and 8.2% in the EU5 respectively), but Windows Phone is very firmly in third place, with three time more sales in the EU5 that its nearest rival (BlackBerry). Also noteworthy is the fact that Windows Phone now has a similar market share in the UK to that of Symbian in February 2011, the time at which Nokia announced its transition to Windows Phone.
Kantar Worldpanel reports its data as a percentage market share of sales in the preceding 12 weeks (i.e. a three month moving average). The data is drawn from a continuous survey methodology, where consumers are interviewed and consumer behaviour recorded.
Other notable trends and data points in this month's Kantar report include a stabilisation of Windows Phone sales in Italy (level after six months of month-on-month decreases), improved sales in Germany (higher than the Windows Mobile dominated 2010-11 period), and Windows Phone's share of sales volume in Australia moving well past the 5% mark.
The growth of Windows Phone sales has been primarily driven by lower cost devices, such as the Lumia 520. Looking ahead, it will be interesting to see whether the introduction of devices like the Lumia 925, 928 and 1020 have a notable impact, something which would be desirable for Microsoft and its partners, if Windows Phone is too avoid being attached to a "best for cheap devices" label.
Windows Phone is enjoying success, but it is on a relatively small scale. However, this is inevitable as it faces a very competitive environment, with a long term slow build the only likely scenario as Microsoft and its hardware partner seeks to build market share. ... <snip rest> ###
Almost exactly two years ago, Google announced its purchase of Motorola Mobility for $12.5 billion. It was the company’s biggest deal ever, far exceeding previous big buys like YouTube for $1.7 billion and DoubleClick for $3.1 billion. Both of those acquisitions were hugely successful, but the Motorola purchase seemed baffling. Mainly, it seemed to provide Google with valuable intellectual property that would allow the company to defend itself against a tidal wave of patent lawsuits. Motorola—the inventor of the very first cell phone—had a great patent portfolio indeed. But the estimated worth of those patents was less than half Google’s purchase price. The other portion brought Google a money-bleeding Chicago-area-based hardware business. The purchase would almost double Google’s head count with employees who brought little to the bottom line. Employees who were not Googly, in a business that seemingly didn’t scale. What was Google thinking?
Finally, we have the answer. The Moto X, announced today, marks the arrival, finally, of the Google Phone.
Finally, we have the answer. The Moto X, announced today, marks the arrival, finally, of the Google Phone.
The Moto X is the first in a series of hardware products that Google hopes will supercharge the mother company’s software and services. A svelte slab with smooth curves at its edge, purpose-built to fit in the palm of your hand. It is designed for mass appeal, not just a slice of the population like Star Wars fans. It has its share of features that distinguish it from the pack, particularly in a period where some of the market leaders are reloading their innovation guns. These include persistent notifications, user-customizable design components, instant photo-capture, and hands-free authentication.
But the defining feature of the Moto X is it’s a virtual ear, always straining to hear its owner’s voice say three magic words that will rouse it to action: “Okay, Google Now.”
Utter those, and a Moto X user becomes master of the universe—to the degree that Google, its developers, and the users themselves have digitized it. The Android mobile operating system was always intended as a gateway drug to Google products and ads. (“We don’t monetize the things we create,” Android creator Andy Rubin once told me. “We monetize users.”) And Moto X is a tool to free-base Google. That’s why, after years of Rubin and others saying, “There is no Google phone,” when referring to Android implementations, this one finally qualifies.
“If you look at what services are most used on smart phones, it’s obvious that they’re things like maps, mail and search—things that Google does,” says Dennis Woodside, Motorola’s new CEO, who formerly headed Google’s domestic sales operation. “Rather than mess with that, we wanted to build a device that makes those services as easy to access as possible.” Making “touchless control” an access point to Google Now, he says, is a prime example of that strategy. “Google Now is a high-speed on-ramp to all that great stuff that Google is building.”
Woodside says this in his neatly kept office in Motorola’s California headquarters, just down Route 101 from the Googleplex. In some ways, he was an unlikely choice to rally a flagging engineering-centric cellphone manufacturer. He began his career as a lawyer and a McKinsey consultant. He joined Google in 2003 and moved to Europe to build its overseas sales organizations. In 2009, he returned to the U.S. to run the company’s North America operations. Woodside learned that Google was buying Motorola Mobility by reading it in a newspaper, just before participating in an Ironman triathlon in Canada. A few months later, CEO Larry Page asked him if he’d run Motorola. Woodside guesses that Page was tapping not only his managerial skills, but also the Google values he had absorbed over the last decade, particularly the impulse to think big and push the technology envelope to get results once considered impossible.
Even before the merger got a formal thumbs-up in May 2012, Woodside was plotting strategy. He did the tough work of layoffs. (It’s no fun handing pink slips to people who spent years working for “the Google of its day,” as he puts it.) But he was generally impressed by the wealth of engineering talent there. The best of those talents had been ill-served by management. They had worked hard despite being frustrated with Motorola’s decline, attributing it in part to a frantic treadmill that churned out zillions of models with limited appeal (catering to specific carriers, demographic, or geographical areas) in order to generate temporary sales bumps to meet quarterly goals. Meanwhile, the company had shied away from long-term investments in riskier, but potentially more innovative products. “We had a lot of shareholder commitments and were churning out 40-plus products a year,” says Iqbal Arshad, who headed the Razr and Droid teams and is now Motorola’s senior VP of product development. “We really couldn’t focus and make a bigger difference.”
Motorola is drastically cutting back on the number of products it produces and selling them in far fewer countries. “We had to get the business much more simpler and focused before we could start building back,” says Woodside. “We went from 45 products to essentially 5 or 6.”
In addition to the core of remaining engineers, Woodside brought in Googlers eager to sign up for the reclamation product, pitching Motorola’s revival as an underdog, startup-style enterprise. Seventy made the move. He also brought in some top outside talent. Job one was developing the phone that would symbolize the company’s turnaround. “You only get to redefine a company once,” says Lior Ron, formerly product head of Google Local and now a Motorola corporate VP of product management. “You only get to do a V1 once. You only get to select those innovation themes once.”
The team decided that the new flagship phone would be designed for wide appeal, as opposed to the Droid’s more limited market slice (males attracted by a sci-fi, sharp-angled sheen). “We realized that so many user needs are being unmet,” Ron says. In his previous post, he had been frustrated that Google couldn’t easily implement its more creative ideas—stuff like getting an instant signal when you walk in a restaurant that starts a stream menus and reviews—because of unaccommodating hardware from different manufacturers. “To do those things you have to innovate in the hardware,” he says. “That’s what got me initially excited.”
Here’s what has the team produced and calls its “innovation themes”:
Touchless Control. This is the signature feature in the Moto X—a way to access the Google Now service without turning on the phone, touching it or even taking it out of your pocket. Google Now not only does pretty much everything that Apple’s Siri does—answers queries, schedules appointments, and plays the song you request—but draws on a vast wealth of data to act as an omniscient personal assistant. (Classic example: It will warn you to end a meeting because it knows that traffic is so snarled, you might not make your next one in time.) It also embodies the grand tradeoff that’s at the core of Google’s ambitions—in exchange for allowing Google to aggregate a bounty of your personal information, drawn from your inputs on multiple services, the company promises to make your life better. By building Google Now into the Moto X front and center, Motorola reveals its potential value to its owner. As Ron says, “This is a great example of Motorola shining a light, via our hardware capabilities, on software and services that Google has.”
A second touchless feature is what Motorola calls Active Display, a low-energy consumption system that provides notifications—and the time of day—without you having to wake up the phone.
Quick Capture Photos. To take a picture, shake your wrist as if a mosquito has lit on your hand and you want to shoo it off. The phone interprets this as photo-time and immediately opens to the camera app. To make things even quicker, the entire screen is a shutter—touch it anywhere to shoot, or hold a finger down for multiple pictures. You get from pocket to picture about a second and a half, less than half the time that Motorola claims that its competitors take.
Battery Conservation. Of course, when a cell phone is constantly listening for a keyword, or waiting for you to shake your wrist, it must burn some energy. When figuring out how to minimize this, the Moto X team drew on conservation techniques the company used on its obscure wrist-based fitness product, the Moto ACTV. They would create a unique architecture for the phone, with eight processing cores. (Thus Google calls this “the X8 Mobile Computing System.”) One of those cores is a super-low-power component that does nothing but listen for the words “Google Now,” enabling the others to slumber away. (If it were not for this approach, says Arshad, such a feature would require three batteries to get through a day.) Another low-power-consumption core monitors sensors—like the accelerometer that signals that you want to take a picture.
Hands-Free Authentication. Only fools don’t protect their phones with a password, but it’s a pain in the neck to punch it in a few hundred times a day. Motorola plans to ease that pain (though not available at launch) by selling plastic tokens that can clip onto clothing—if the tab is within a few feet if the Moto X, no password necessary. (The tokens use NFC technology, built into the phones.) The Moto X will also let you set up password-free “safe zones” like your car.
Customizable Design. Unlike the sharp angles of the Droid, the Moto X sports a clean and hand-friendly industrial design. “I’d love this device to be the equivalent of the person who walks into the party, and it’s not the intimidating person in the corner or the performer, but the one is who is comfortable there,” says Jim Wicks, the longtime head of Motorola’s design who is among the company veterans reveling in the new ownership. “We’re taking this in a direction that works for Motorola now, but it’s also a Google-like device,” he adds. “It’s simplified, but with a sense of play.
But the flashy part of the Moto X’s personality is what users might bring to it via Moto Maker, a factory personalization scheme reminiscent of mass individualized products like the Nike iD shoe. A website allows Moto X buyers to customize the phone, choosing from 18 colors and materials for the back of the device as well as different accents for the ring around the camera lens and the volume and on-off buttons. Soon after launch, Motorola will offer actual wood veneers. You can even choose headphones in matching or contrasting colors. Those choosing this “virtual SKU” also enter their software preferences, and in four days or less receive the phone, ready to use out of the box. (For a limited time after launch only AT&T customers can do this—later, Motorola will open it to its other carriers: Verizon, Sprint, T Mobile and US Cellular.) Just as with the Kindle, the device already knows who you are—so it’s not surprising that Motorola’s VP of supply side and operations is Mark Randall, who left a similar job at Amazon.
What’s more, Motorola will be assembling these phones in a newly acquired factory—not in Tianjin, China but Texas1. (The facility was originally built for Nokia.) Motorola rebuilt the 480,000 square foot factory to copy the exact manufacturing process used in China, except for the brand-new, highly-automated process that can deliver any of the thousands of potential color combinations that customers specify. “Many supply chain theorists and academics says you can’t do this, but when you tell Google it’s impossible, the reaction is, ‘Let’s go do it,” says Randall.
It will be interesting to see what happens in AT&T stores when people are faced with the option of going through a selection process and waiting four days for a phone, or just picking a black and white phone and leaving with it on the spot. “We’ve done plenty of studies and think there are lots of people who are willing to wait,” says Woodside. “If you start offering materials like wood, the number goes up dramatically.”
Pure Android—almost. In the past few years Google’s Android partners have tweaked the operating system, sometimes slapping on entirely new interfaces. They do this because they feel that running a vanilla system fails to differentiate them from competitors. Overall, the Android ecosystem is threatened by a trend towards “forking” different versions. Motorola takes a polar opposite approach—as a division of Google, its mission is to highlight the vision of the Android team, and so its version is as mildly modified as possible. It’s basically a stock build of Android 4.2.2, with most of the customization around the notifications, voice activation, and the camera. This approach positions Motorola to provide more timely upgrades, which have been problematic in the Android ecosystem. “Nobody’s buying products because of minor incremental improvements to Android,” says Steve Horowitz, Motorola’s head of software (and part of Google’s original Android team). “So let’s rely on what the Android team does and build experiences that will leverage Google services—and then you see things like touchless control, an entry point to Google Now.”
Ever since the Motorola deal was announced, Google has made a point of saying that its company-owned mobile hardware company won’t get special access to the Android team, and will be treated the same as Samsung, HTC and other Android partners. When Woodside repeated this, saying that, for example, Motorola would have to compete just like its rivals to make the next Nexus phone—a model co-designed by Google to showcase the Android system and other hardware innovations concocted by Google—I asked him what possibly could be different in a Motorola-partnered Nexus phone than the current Googly creation that his team has concocted. He was temporarily speechless. “That’s a good question,” he finally said before reiterating how important it is for the Android ecosystem to grow and thrive.
When you talk to Motorola’s leadership team, at a certain point, their message is, unsurprisingly, indistinguishable from Google’s. Certainly both parties must sense that Motorola’s handset competitors—even the seemingly-impervious Apple and Samsung—are moving by increments, not leaps. And they smell blood. “Three years isn’t long term for Google—ten years is long term for Google,” says Arshad. “We want to create that future of cognitive computing—that’s our goal.”
To do so, Motorola Mobility has modeled its long-range research group, Advanced Technology and Products (ATAP), on an outfit known for delivering blockbusters like stealth bombers, autonomous cars, and the Internet. That’s DARPA, the government Defense Advanced Research Projects Agency. Hoping to get similar jaw-droppers, Motorola hired the head of DARPA, Regina Dugan, who brought along her deputy, Ken Gabriel. “We asked ourselves—what were the elements that made DARPA so successful, and could you translate it to an industrial setting,” says Dugan. To her, the key was adopting fast-developing technology just at the point where it can be put to use.
Like DARPA, Motorola’s ATAP hires researchers (it calls them Technical Program Leads) for two-year stints—short enough to put pressure on them to work intensely but long enough to bring something to demo. In an unusual move for a corporate group (but standard for DARPA), the program leads contract with outside researchers to develop parts of their projects. “When we’re trying to solve a hard technical problem, we go where the best people are,” Dugan says. One current project draws on 40 computer vision experts working for 30 entities, including private industry and six universities, hailing from five countries. “In six months we retired the most significant technical risk of the program,” she says.
Even though the project leads’ two-year terms are only half up, some of their work appears in the Moto X—for instance, the password-free NFC token. (Down the road, says Dugan, Google is working on more exotic versions based on temporary tattoos and even edible tokens that you gulp down like pills.) Dugan’s team also contributed to the Moto X’s quick-capture photography and maker-style personalization.
“Some think that it’s hard to get a return on higher-risk projects,” says Dugan. “I’ve found the opposite. When you focus on those things, you yield returns more often—that’s where the epic shit is.”
In short, Google is doubling down on its massive acquisition fee to make phones that push technology and, not incidentally, promote Android and Google services in general. Building Motorola itself into a profitable entity is not an immediate objective. “Of course we can’t be a drain on the company forever,” says Woodside, “but the goal is not necessarily to make massive amounts of money in a short period of time—we have a much longer time horizon than that.”
Woodside does think that profits will come, dismissing the critics who claim that Samsung and Apple have locked up the market. “It’s great when people say that, because they’re just wrong,” he says. “No way the world’s going to be the same. Nokia and Motorola are good examples—companies that had 30 percent market share less than 10 years ago. And here we are today.” (Left unsaid: Motorola and Nokia struggling for relevance.)
In the next few years, he says, a well-funded Motorola will turn itself around by taking advantage of new materials and technology that will, for instance, allow for flexible, virtually unbreakable screens. Motorola also has plans to extend the smart phone market to developing countries and innovate in low-cost plans. And then there’s the crazy stuff coming out of Motorola’s DARPA that no one will talk about yet.
The $12 billion experiment begins today with the Moto X, available later this month for the standard price of $200 with a two-year carrier contract. Woodside would prefer that people not call it the Google Phone: “People don’t associate Google with phones,” he says. “Motorola’s the brand that resonates to consumers.”
But the phone itself knows better. To Moto X, the magic words are “Okay, Google Now.” ###
Honestly, I haven't followed Moto inside Google. My guess is that the company is in downside spiral (but then who aside of Samsung and Apple isn't?). How much marketshare did it lose since it was acquired? How much money did it lose?
Of course, Google has money to keep it on life support and even engage in DARPA'y research. But ultimately: does it deliver? :)