The low cost Moto E may put a smile on the face of consumers, but it could be a millstone around the neck of Motorola's new owner, Lenova.
The new smart phone will sell for just £89. But some analysts believe that it will be a heavy loss maker. They say the device is bad news for other Android makers as it will 'ensure that Android continues to commoditise at a breakneck pace’.
Dr Richard Windsor of Radio Free Mobile Windsor says Lenovo simiply doesn't make enough money to continue producing low end smart phones at such aggresive prices.
'It is likely to be a financial disaster for Lenovo which, after taking on Motorola, will be just $100m above break-even at the group level.'
Products such as the Moto G and the Moto E are ‘accelerating the race to the bottom’ for Android manufacturers. They are likely to be canned once Lenovo takes over’, unless Google or someone else compensates the company to make such devices.
‘I suspect that Google loses money every time a Moto G or a Moto E ships and this is something that Lenovo cannot afford to do,’ he explained.
He believes the Moto E and the Moto G are clearly aimed at getting more capable internet devices into the hands of low-end users.
The objective is to drive internet use through the Google eco-system, which Google can then monetise.
‘It is pushing more capable devices down through pricing tiers – generating more traffic to categorise and sell advertising on’.
Google could justify making losses because it cashes in on mobile advertising revenues.
‘Lenovo can’t as it has no eco-system’, says Windsor.
But a possible way forward for Lenovo is to join Google's 'Silver program’, which involves Google paying handset manufacturers to make a device. ‘I can see Google compensating Lenovo if it wants to see the Moto G and E lines continuing’, says Windsor.
Lenovo's deal to acquire Motorola Mobility will mean it will become the world's third-biggest smartphone maker – a dramatic turnaround considering that two years ago its market share was insignificant.
Motorola currently accounts for 1.2% of the global smartphone market with 14.2 million devices predicted to be shipped in 2014.