Before the emergence of Samsung’s Galaxy devices, Motorola Mobility’s Droid phones were the closest thing Apple Inc. (NASDAQ:AAPL) had to a true smartphone competitor. Now, Motorola is planning to reignite the rivalry this year. Its Moto X smartphone (previously known as the “Xphone”) will be available by October.
Moto X
Motorola’s CEO Dennis Woodside revealed the company’s plans for its smartphone division on Wednesday. During an interview at the D11 conference, Woodside said the Moto X would be available sometime between now and October.
The Moto X has been at the center of a great deal of media speculation over the last few months, primarily because Google Inc (NASDAQ:GOOG) now owns the company.
According to Woodside, that gives Motorola somewhat of an advantage — it can’t give the phones away, but it can afford lesser profit margins.
Reports have indicated that the Moto X would offer unprecedented durability for a smartphone. That could be true, but it seems the phone’s sensors will really make it stand out. According to Woodside, the phone can react to its environment. In fact, it will be “contextually aware” of what’s going on, able to tell if the user is driving down the highway, for example.
In that context, back during Google’s I/O conference, CEO Larry Page made a comment that seems relevant. Page remarked that, prior to coming onstage to speak, he had to make sure that his phone was turned off. That’s kind of pain — shouldn’t the phone be smart enough to do that for you?
Without actually seeing the Moto X, it’s hard to speculate on its potential sales. But that kind of smart environment sensing sounds both unique and promising — certainly more promising than some of Samsung’s latest features, which have been criticized as gimmicky.
A competitive smartphone landscape
There’s a big misconception about the smartphone market: it isn’t a two-horse race. While it’s true that Apple Inc. (NASDAQ:AAPL) and Samsung account for just about all the profit earned in the smartphone industry right now, in just the last few months, the market has become much more complex.
First, there’s the recently released HTC’s One, which has received rave reviews from tech critics, many of them arguing that the device is superior to Samsung’s Galaxy S4. Then, there’s Sony Corporation (ADR) (NYSE:SNE), a company currently attempting to reinvent its electronics division. So far, in the last few weeks, it has trotted out waterproof Android phones in the form of the Xperia Z and Xperia ZL. At the same time, LG offers a number of quality phones, such as the incredibly cheap Nexus 4, released last fall.
This is to say nothing of phones with other operating systems, like Research In Motion Ltd (NASDAQ:BBRY) BlackBerry’s new BB10-based offerings, or Nokia Corporation (ADR) (NYSE:NOK)’s various Windows Phone-powered Lumias, such as the just-released Lumia 928.
The Moto X will simply be another competitor, although by the sounds of it, a very innovative one.
Apple will continue to face margin pressure
What this means is that Apple Inc. (NASDAQ:AAPL) should continue to see its profit drop in the coming quarters. The company remains heavily dependent on the iPhone for the majority of both its profit and revenue, and new competition certainly won’t help.
Of course, Apple Inc. (NASDAQ:AAPL)’s critics have been claiming the iPhone was going to get crushed by the competition for years. But something seems to have changed since last summer.
The Samsung Galaxy S3, with its larger screen, was really the first device commentators have accepted as a legitimate alternative to the iPhone. Samsung followed that up with the Galaxy Note 2; in the process, creating an entirely new market (the phablet) that Apple Inc. (NASDAQ:AAPL) has yet to enter.
Research In Motion Ltd (NASDAQ:BBRY) BlackBerry had attempted to beat back the Apple onslaught as early as 2008, rolling out its first touchscreen, the BlackBerry Storm, to compete. But the Storm failed, and so BlackBerry was forced to rethink its strategy. It’s too early to say if BB10 will be a success, but it seems like a much better effort.
Now, Motorola seems to have followed BlackBerry’s example. In addition to the Moto X, Woodside said that the company would be reinventing its entire product line in the months ahead.
The bottom line is that the iPhone is really facing the most challenging market in its history.
Samsung is even worse off
Arguably, Samsung is in an even worse position than Apple. Last summer, its Galaxy S3 was unanimously seen as the best Android smartphone. Now, many people see the HTC One as being the better device, and soon, Samsung will be forced to compete with Motorola.
Samsung does have a big advantage in terms of both name recognition and budget, but consumers should ultimately migrate to the best product. And because they all use the same ecosystem, Samsung is actually more exposed to Android rivals — switching between Android phones is far less painful than migrating from the iPhone.
A competitive smartphone market
Without seeing the Moto X, it’s too early declare it a success. But it sounds like it could be a great device. More broadly speaking, it’s just another example of how competitive the smartphone market is becoming. That’s not good news for Apple, and it could be even worse for Samsung.
But with both Apple and Samsung gearing up for new products, there’s reason to be hopeful. But with so much new competition, neither company should expect the smartphone market to be as profitable as it’s been in recent years.
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.
The article Forget Samsung, Motorola Could Be Apple’s Biggest Threat originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
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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