Google Inc (NASDAQ:GOOG) has been heavily criticized for its 2011 purchase of Motorola Mobility. The handset maker has been a persistent drag on Google Inc (NASDAQ:GOOG)’s bottom-line, as the unit’s inability to compete with other Android OEMs (like Samsung (NASDAQOTH:SSNLF)) has led to quarter after quarter of losses — Motorola lost $271 million last quarter alone.
That could soon change. Motorola’s new advertising campaign suggests a completely revamped company, and the upcoming Moto X smartphone could be the first in a series of popular products.
If Motorola is on the verge of a turnaround, that could shift the unit from a liability to an asset.
Motorola’s advertising campaign
Motorola rolled out a new advertising campaign to coincide with the Fourth of July holiday. The ad which, as Business Insider notes, bears a striking resemblance to Apple Inc. (NASDAQ:AAPL)‘s recent campaign, is for the company’s upcoming Moto X smartphone.
Regardless of the phone’s features, it is notable for one major reason: it will be the first smartphone fully manufactured in the US.
Will that ultimately boost sales? If the device proves to be terrible, it won’t matter where it’s made. But if it turns out to be a solid phone, the “made-in-America” tag could be a point of pride.
Motorola’s moonshots
In an interview at the D11 conference in May, Motorola’s management explained the division’s new philosophy. Going forward, the company will attempt “moonshot bets” — aggressive, high risk/high reward moves that could fail spectacularly, or revolutionize the industry.
The Moto X could be the first of these such bets. The device has yet to be fully introduced to the world, but Motorola’s CEO has claimed that the phone will be “contextually aware,” that is to say, it will be able to tell what’s going on around it, and react accordingly.
The phone is able to, for example, tell if it’s in a car traveling down the highway. In that instance, perhaps the Moto X could switch over to voice-commands, or activate Google Inc (NASDAQ:GOOG) Maps.
Without actually seeing the phone, it’s impossible to predict its success, but that kind of innovation could certainly help.
Apple and Samsung’s disappointing sales
Apple Inc. (NASDAQ:AAPL) and Samsung continue to make billions from their smartphones. In fact, when it comes to smartphones, they are the only two companies making any profit at all.
Despite this, the stocks of both tech giants have stumbled (Samsung within the last month, Apple Inc. (NASDAQ:AAPL) since last October) as their growth has slowed. Reports of disappointing iPhone 5 sales plagued Apple all last fall, while sales of Samsung’s S4 are said to have slowed significantly.
Perhaps this is because the phones have seen little innovation, and the smartphone market is largely saturated.
Samsung’s S4 was criticized by tech reviewers, who mostly liked the phone, but found it to be little different from the previous S3 model.
Apple’s iPhone 5 adds in LTE connectivity, and a slightly larger screen, but given continued strong demand for the 4 and 4S models, consumers do not seem particularly wowed with these relatively minor enhancements.
Motorola’s Moto X is probably more likely to steal Samsung’s customers than Apple’s, as both Motorola and Samsung use the same operating system. However, if the Moto X offers some truly innovative new features, perhaps some Apple consumers will be lured into making a switch.
Buy Google based on Motorola?
Last quarter, Google Inc (NASDAQ:GOOG) earned nearly $4 billion — in that context, the near $300 million Motorola lost doesn’t seem so significant. But if Google Inc (NASDAQ:GOOG) can return Motorola to profitability, it could raise earnings by at least 10%.
And, should the Moto X turn out to be the next big phone, Motorola could boost Google’s earnings significantly. In April, Samsung said its profit had jumped over 40% from the prior year — much of that due to the success of its Galaxy smartphones.
Given that Motorola represents a sliver of Google’s total business, investors should not buy the search giant based on the handset maker alone. However, the unit’s potential could help investors justify Google Inc (NASDAQ:GOOG)’s rich valuation, as it could help Google surprise to the upside in future quarters.
The article A New-Look Motorola Could Boost Google Shares originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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