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Google Inc (GOOG), Apple Inc. (AAPL): The Moto X Is Great, but It’s Not Enough

Remember when Google Inc (NASDAQ:GOOG) acquired Motorola? More than a year later, the online search king is finally putting the $12.5 billion acquisition to work with a Google Inc (NASDAQ:GOOG)-influenced smartphone: the Moto X.


Moto X. Source: The official Motorola Blog.

Not surprisingly, Google Inc (NASDAQ:GOOG) is certainly aiming to compete with Apple Inc. (NASDAQ:AAPL)‘s iPhone and even Samsung’s flagship Galaxy S4. Set to launch in late August or early September, the phone is available for $199 with a two-year contract.

The Moto X is packed with some great features, starting with design personalization that allows customers to choose from thousands of combinations. Highlights include up to 24 hours of battery life, a Snapdragon S4 Pro processor, and Touchless Control via Google Inc (NASDAQ:GOOG) Now integration.

Does this mean Google Inc (NASDAQ:GOOG) now has a phone that will overtake the iPhone? Probably not. Does this mean Google Inc (NASDAQ:GOOG) can now earn billions selling smartphones? Absolutely not.

Reality check
Though Google Glass, driverless cars, and Touchless Control on smartphones are all certainly interesting technologies, don’t forget that Google doesn’t make money selling products. It makes money selling ads. In Google’s second-quarter results, Motorola Mobile accounted for just 7% of the company’s total revenue. In fact, Motorola Mobile earned Google a non-GAAP operating loss of $49 million during the quarter.

Meanwhile, Google’s business, excluding Motorola Mobile, generated $4.21 billion in non-GAAP operating income, or 32% of Google revenues.

And Apple Inc. (NASDAQ:AAPL) certainly has no plans to let Google walk into the premium smartphone market without a fight. Last quarter, Apple Inc. (NASDAQ:AAPL) sold 31.2 million iPhones, more than it has ever sold in any third quarter. During the quarter, s iPhone business alone generated $18.15 billion in revenue.

Google’s cash comes from ads
Though Google’s Moto X may definitely help Google establish a stronger presence in the important smartphone market, it’s not a large enough piece of the pie to move the needle for Google yet. For the time being, investors could eye the Moto X’s success for the sake of curiosity, but there’s no need to track the phone like Apple Inc. (NASDAQ:AAPL) investors track iPhone sales.

Keep things in perspective. Google is still the worldwide leader in search, making money from a profitable ad network. Hardware is a still a very small portion of Google’s business.

The article The Moto X Is Great, but It’s Not Enough originally appeared on Fool.com is written by Daniel Sparks.

Fool contributor Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Apple and Google.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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