It's Not A Smartphone That's Going to Save Motorola or HTC

Earlier this year Google sold Motorola to Lenovo for $2.9 billion.  The sale of Motorola by Google was definitely unexpected. Despite Motorola’s shrinking revenue and operating losses, it seemed Google still had faith it could turn the company around. When Google acquired Motorola back in 2011 for a massive $12.5 billion it was originally thought to be a strategic way to get into the Android hardware business, however, as we know now that never truly panned out as Motorola really was operated separate from Google.  Of course the other reason for the acquisition (as well as the huge price tag) was the massive patent portfolio owned by Motorola, something which Google still owns even after the sale to Lenovo.

During its time at Google, the biggest thing Motorola released was the Moto X, a moderately successful, mid-range smartphone with a fair amount of customization options.  In its last quarter (Q4 2013) as an official Google company, Motorola posted $1.24 billion in revenues and a $384 million operating loss — not so great and definitely weighing down Google’s bottom line.  But now it’s not Google’s problem anymore.  It’s Lenovo’s.

So what should Motorola and Lenovo do?  Look to the next generation of devices to make a foothold.  And that’s wearables, which is expected to be a $19 billion business in 2018 according to Juniper Research.  The smartphone market is way too saturated and mature to make a big enough dent in at this point.  Just look at all the trouble HTC is having, even though it has a great product.

Motorola announced its smartwatch (the Moto 360) powered by Android Wear back in March and it looks amazing.  Honestly, it’s by far the best-looking smartwatch out there today.  The company needs to focus more on this type of innovation and less on smartphones.  I’m not saying don’t make new smartphones, because they definitely should make new smartphones and continue to push the boundaries in the market, but I think their real success will come in wearables.

And really, HTC should follow in these footsteps.  They too, are a company that needs to succeed in the next wave of devices in order to stick around for years to come.