Goldman Sachs: Motorola Moto X price could be $299; device costs $225 to produce

Goldman Sachs: Motorola Moto X price could be $299; device costs $225 to produce
A 21 page report from trading house Goldman Sachs confirms that the price of the Motorola Moto X will start at $299 off contract. In case you were worried that the wholly owed Google subsidiary couldn't turn a profit at that price, the report further details that the cost to Motorola to build the unit is $225. The phone will launch later Thursday in New York City with a press embargo expected to expire at 3PM EDT.

According to Goldman's report, by pricing the Moto X at such an affordable 'Google Nexus 4' like price, it can make sure that the Google search engine is disseminated to a large number of the smartphone buying public without paying the rates that Apple and Samsung charge to make Google the default search engine on their phones. By pricing the Motorola Moto X at the $299 off contract price, Google is sending a message to Apple and even its partner Samsung, that it can make its own smartphones and distribute Google on its own terms.

According to the Goldman analysts who worked together on the report, Motorola CEO Dennis Woodside said that using tools like the gyroscope and accelerometer will allow the phone to know when it is traveling in a car and turn on hands-free features automatically. The Moto X could also use the accelerometer, proximity sensor and camera to determine that the user is holding the phone up to his eyes in a classic photographer's pose and automatically open the camera app. Motorola has been under fire for its cameras going back to the Motorola DROID and is hoping to make a statement with the rear shooter on the Moto X.

According to the Goldman analysts, the Motorola Moto X is potentially a very important phone for Google. The analysts believe that Google pays more than 75% in Traffic Acquisition Costs (TAC) to keep Google as the default search engine on iOS devices, leaving little left for Google. Considering that iOS rpresented 60% of all mobile internet traffic in 2012, keeping Google as the default search on the iPhone and iPad is financially important for Mountain View. Google is believed to pay Samsung 10% of TAC to keep Google as the default search engine on Sammy's handsets. Since Samsung phones had a 31% global market share last year, keeping Google as the default search engine on the Korean OEM's phones is also a must for Google. If the Moto X flops, it is believed that Samsung will as for a hike in the percentage of TAC it receives from Google.

Consider though that Google pays 0% of TAC to keep its name as the default search engine on the Motorola Moto X. That means the bigger the market share that Google can win with this device, the more money it will make. Thus, keeping the price of the Moto X competitive is important to Google. As far as Apple is concerned, Goldman sees no threat right now with the Moto X launch. But in the long term, if the Google-Motorola unified approach catches on, it could spell some trouble for Apple forcing them to innovate. That is something that Apple has been failing to do lately, according to critics. As for Samsung, it could decide to push Tizen OS models harder as retaliation for Google releasing its own hardware with the Moto X.

source: GoldmanSachs via Barrons

Related phones

Moto X
  • Display 4.7" 720 x 1280 pixels
  • Camera 10 MP / 2 MP front
  • Processor Qualcomm Snapdragon S4 Pro, Dual-core, 1700 MHz
  • Storage 16 GB
  • Battery 2200 mAh(13h talk time)

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36 Comments

1. GeekMovement unregistered

Looking forward to it!

33. blahb

Posts: 48; Member since: May 16, 2012

While I love my Unlocked GNex on VZW and wanted to wait for an upgrade with an SD800 to buy off contract to keep my Unlimited Data, I plan to buy this device immediately to support Google/Moto's initiative of low cost hardware off contract. Really want this pricing strategy to bring down the overpriced carrier model that is currently in place. If this takes off I'd love to see flagships in Q1 of 2015 @ ~$450 off contract instead of $599 - $799. Worthy cause to support IMO.

2. rtol1

Posts: 21; Member since: Jul 18, 2013

Wow. Read some of the excerpts from the linked article and it makes sense why Google would want provide Moto with a $500 million budget for marketing. They could definitely make a nice profit if they sell enough units. Here's hoping for a $300-$400 dollar price tag off contract!

30. iyngr

Posts: 72; Member since: Jul 14, 2013

Its 299 Off contract Plus Taxes.

32. TheLolGuy

Posts: 483; Member since: Mar 05, 2013

That's speculation. While I'm inclined to agree (I personally think it'll be $350 though) there has been no official announcement yet. You're only setting yourself up for disappointment by assuming things.

3. sss_ddk

Posts: 76; Member since: Mar 05, 2013

-turning a profit on a 300 $ phone that costs 225 to make? what about software?Maintenance and support,etc..? -Samsung will not push tizen anywhere..If Nokia is batteling with WP8, imagine what sammy would endure with Tizen -If the Moto X flops...nothing.. Nexus 5 is around the corner. That being said, i am not sure i like the idea of my phone being aware of its surroundings and always listening.but if the X8 low power cores can be used by developers for more intelligent stuff (network keep alives, playing music) that would be great.

11. Dr.Phil

Posts: 2487; Member since: Feb 14, 2011

Software is most likely handled by Google with some input by Motorola. So, I would think they would be the ones really dealing with that. You also have to remember that a company's goal as a standalone corporation is not the same as the goals of a company owned by another corporation. A standalone company would want a good profit margin because it needs that money in order to expand, but in this case Motorola just needs a decent profit margin because it's parent corporation is doing all of the expanding. I hope that makes sense. Comparing Windows Phone 8 to Tizen is like comparing oranges to tangerines. They are similar in some aspects (such as being mobile OS' and having certain features and so on) but they are also very different from each other. Also, Tizen has gotten more support from various cellular companies that Windows Phone never got before it's release (really AT&T was the only company to support Windows Phone in the beginning). Nokia is battling with WP8 because they aren't able to have the freedom to offer the high-end specifications that consumers would like. An OS should only dictate the minimum hardware specifications required to run smoothly instead of dictating the minimum AND maximum hardware specifications required to run the OS. When that happens, it stifles innovation because manufacturers aren't able to offer potentially revolutionary hardware like the X8 processor (I say potentially revolutionary because of the new idea of having two different processing cores handling sensor data and speech recognition which takes a lot of load off of the regular application cores) in the Motorola X or the Exynos 5420 by Samsung. In fact the Nokia N9, which is arguably the last time that Nokia really got the chance to choose it's own hardware for it's devices, had a TI digital signal processor in addition to the regular TI Cortex-A8 processor found in the device. This additional processor performed image processing for the camera, audio processing for telephony, and data transmission. I don't know of any other phone at that time that had that kind of technology in it.

19. sss_ddk

Posts: 76; Member since: Mar 05, 2013

1-I am not arguying about the sanity of the decision to sell at 300.I am saying that you cannot make a profit on that phone if its bill of materials is 225$. Doesn't matter who is not making a profit..no one is :) 2-That's you supposing that WP troubles come from lack of a 1080p screen and a quad core processor.I don't believe this is the case for most non-techies and a few hardcore gamers.

26. Dr.Phil

Posts: 2487; Member since: Feb 14, 2011

They are making a profit though. They are going to make more of a profit than LG did with the Nexus 4. You are just thinking about $75 as just $75 instead of thinking of $75 over the course of selling a million devices which translates into $75 million. Even after all of those things you mentioned, they will most likely still come out with a pretty good size profit (in the tens of millions). EDIT: Also, the device may cost $225 to build but that may or may not take into account the cost of each device in bulk supplies. For instance, when you order one custom t-shirt online it may cost you $10 but if you buy 50 t-shirts it may only cost you $7.50. This could apply in some way to the Motorola X. I never mentioned WP8 troubles being because of the lack of a quad-core processor or a 1080p screen (I don't even know why you would think that considering I've defended the Motorola X for not having a quad-core processor or 1080p screen). What I said was that because of the closed system it doesn't allow innovation to happen. Hardware is a big part of that but it also has to deal with software. Developers prefer open systems over closed systems because of the flexibility and freedom to create the applications they desire. In WP8, Microsoft charges a license fee along with controlling how you develop your applications (you have to use their developer tools and you have to get the application approved through them).

28. neutralguy

Posts: 1152; Member since: Apr 30, 2012

You always make the longest comments, Dr. Phil. I must say, you should apply for the job offered by PA as an author.

4. veer.d

Posts: 89; Member since: Jul 12, 2013

if google don't pay to apple then what they use yahoo or bing !!!! if they do so people will kick their a*s

16. Taters

Posts: 6474; Member since: Jan 28, 2013

Good point. Might be worth a bluff for Google. If Apple does use Yahoo or Bing then that could really hurt Google but it would also hurt Apple too. So might be worth a straight out bluff from Google to lower that 75% to something more reasonable and less of an ass raping by Apple. Damn, I don't know how Apple does it. They are raping consumers, retailers, carriers, HTC for every phone sold, and they are somehow raping Google too. Samsung is the only one that refuses to get raped by them and Microsoft just stands to the side as a spectator. For all of our sakes, lets hope more people begin standing up to them.

5. neutralguy

Posts: 1152; Member since: Apr 30, 2012

I guess it would be around 349 to 400. Not bad for a mid range device. But would rather have nexus 4 or 5 if it there would be this year.

6. rtol1

Posts: 21; Member since: Jul 18, 2013

Now that I've read a little more of the article, I don't think I saw anywhere on there that the price has been CONFIRMED to be $299 off contract. If anything, it looks like Goldman Sachs is simply making several projections, showing that Google/Motorola could in fact turn a profit IF they sold enough units of the $299 Moto X. The article only seems to SUGGEST that it may be possible for them to sell it that low and still make some money off of it.

7. sri_tech

Posts: 188; Member since: May 21, 2013

If it costs $225 to make then I think they are selling for zero profit, because there will so many other costs like R&D for developing the phone, retailer margin (this will be very high), marketing etc.. If they can have wider distribution it will definitely eats into apple, samsung sales.

9. darkskoliro

Posts: 1092; Member since: May 07, 2012

This could be a promotional sale, to regain the trust of the public and for brand recognition. Much like what Google did with the N4. After a period of time, they might start producing high end speced products again to compete. Going head on with the other tech giants might not be worth it, too much of a gamble/risk.

8. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

"Motorola has been under fire for its cameras going back to the Motorola DROID and is hoping to make a statement with the rear shooter on the Moto X." Other than statements about how the camera processes data (as in oversampling, for example), I haven't seen where there are specifics being provided regarding the camera and how it is going to compete against other vendors' camera implementations. 2013 seems to be the year for cameras in smartphones. I wonder if the X will really step up the game in the camera department?

15. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

Your citations are just explanations. I mentioned your citation of over-sampling in my OP. It would be nice to see some actual comparison pics. Nokia learned that lesson well, why not Moto?

18. a_merryman

Posts: 749; Member since: Dec 14, 2011

No, you said there were only statements on how the camera processes data with oversampling. I was saying there are other specifics as well, 1.4-micron pixels, RCBC filter. Both of those should add up to good lowlight pictures a la HTC One or Lumia 920 but with more detail due to the higher pixel count. I mean, if you look at the fact that pixels are larger like in the One, the filter they're using is supposed to let in ~50% more light, and they're oversampling like the 1020 does.....You should be able to infer that unless their algorithms completely suck, the phone should be staunchly in the top tier of camera phones. And be able to snap quicker pictures in daytime since it can gather so much light. Hopefully it has an OIS as well (this is my wish, I haven't seen anything to suggest it does). Of course we haven't seen pictures yet, the phone isn't out yet... Hopefully at the press release we will finally see some pictures. I'm sure we will, because it seems like Moto really wants to make this a differentiating factor. I'm assuming thats why they didn't go into detail with it at their Droid event.

10. Jklaz

Posts: 159; Member since: Jul 01, 2013

Guys if this phone is 300 should I dump my s3 for it? I mean I still have 4.1 and the aosp 4.2 ROMs aren't as stable as the 4.1 touchwiz. And I don't like touchwiz. I could probably get 250 on craigslist for my phone is it worth it? Just want some honest opinions

20. Shatter

Posts: 2036; Member since: May 29, 2013

Yes ditch it you are losing nothing except Samsungs soft(bloat)ware. This phone beats it in every category, if you don't like this phone get a Nexus 4 to replace that s3.

34. Jklaz

Posts: 159; Member since: Jul 01, 2013

thanks for the reply! I've thought about the nexus 4 but im on verizon

35. o0Exia0o

Posts: 903; Member since: Feb 01, 2013

If I were you I would not do anything rash. I would wait to see the Moto X and the features that it brings, maby even play with it in the store before you purchase it. As for me I have a Moto DROID RAZR M and I am between this (the Moto X) and the Droid Mini. I am going to play with both before I decide.

36. blahb

Posts: 48; Member since: May 16, 2012

I assume you still have unlimited data at a reasonable price? If so there is no indication you will ever be able to get a subsidized device again without giving up your Unlimited Data. So far the rumors indicate the MotoX has a similar core processor to the VZ S3, MSM8960, but will be clocked higher at 1.7Mhz, have a huge bump in the graphics processing, and better battery life with the use of the two companion cores. That along with everything else this device appears it will offer off contract at ~$300 makes it a no brainier for me upgrading from GNex. Unless you really love TouchWiz on 4.1 and like waiting on upgrades, the MotoX should provide a much better package than what your S3 currently provides. IMO sell it and go with the MotoX even if just to hold you over till your next upgrade. I plan to buy one ASAP to support the movement of cheep un-subsidized phones on non-GSM carriers like VZW and Sprint. That is if all the rumors true...

12. rantao333

Posts: 346; Member since: May 21, 2013

i dont know whats so "mid range" about the motorola phone 1. the smoothest experienced and most responsive touchscreen among s android phone 2. the latest & uptodate GPU in the market right now . 3. the latest camera technology(clear pixel) which capture great low light photo. 4. one of the greatest battery life in the market right now. 5. the extremely durable kelvar as the body. 6. It is one of the thinnest phone now given the size & battery capacity 7. directly under google and wouldnt worry about any update vs others top android phone in the market now 1. Some with Plastic body 2. Lagginess & unresponsive touch screen even with multi core 3. Mediocre battery life 4. not so thin after all given the battery capacity 5. great day light photo but not so good low light photo 6. many bloatwares & delay of update 7. Same GPU performance i would be very happy to call motorola x phone as one of the top smartphone

22. Shatter

Posts: 2036; Member since: May 29, 2013

Yup, if this phone is $300 I will probably be getting one

14. Taters

Posts: 6474; Member since: Jan 28, 2013

Apple charges a 75% TAC and Samsung a 10% TAC and somehow Samsung is seen as the villain and not Apple? Please, the media needs to grow a set of brains. Especially Pocketnow and Anandtech. The Verge is pretty bad too but at least they do not pretend to be anything but Apple shills.

17. rantao333

Posts: 346; Member since: May 21, 2013

why u hate apple when google pay apple 75% of TAC while 10%for samsung. u should hate google.

24. Taters

Posts: 6474; Member since: Jan 28, 2013

I lost respect for Google yes. But Apple is the one insisting on 75%. I am sure Google is not the one freely offering it. lol Apple: Give us 75% or we use Bing is a lot more likely than.. Google: I'll give you 75%. Take it or leave it.

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