Google Bets On New Customizable Moto X Phone

Motorola on Thursday unveiled a new smartphone that consumers can personalize with a choice of colors and materials, hoping to stand out in a crowded market and justify the $12.5 billion that Google Inc paid for the ailing handset maker.

The highly anticipated "Moto X" marks the cellphone maker's first flagship device since Google (NASDAQ:GOOG) bought the company in 2012, and is its latest attempt to break into a smartphone market dominated by Apple Inc (NASDAQ:AAPL) and Samsung Electronics (KRX:005935).

The Moto X will go on sale in the United States at the end of August or the beginning of September for a suggested retail price of $199.99 to customers who sign a two-year contract at five of the biggest U.S. mobile network operators.

Google faces a steep climb in its effort to revive the mobile phone pioneer. Motorola is betting that it can win over consumers by offering a huge palette of colors to personalize their phones, as well as unusual phone materials such as wood.

AT&T Inc(NYSE:T) , the No. 2 U.S. mobile service provider, will have exclusive rights to let its customers customize the phone from a selection of 18 colors for the back, two for the front and seven accent colors for an undisclosed time period.

By emphasizing the ability to personalize the device, Motorola is taking a different tack than many of its smartphone competitors, which battle over specifications such as screen resolution and processor speed.

"They're not playing the 'mine is bigger than yours game,'" Avi Greengart, an analyst with Current Analysis, said. "Their approach is that this is what consumers actually need.

"I have no doubt there are people who want to customize their phones. The question is how many of them," Greengart added.

Once the global No. 2 phone maker, Motorola's market share was down to 2 percent in the second quarter, ranking it 12th among smartphone makers, according to research firm Strategy Analytics.

While AT&T will allow customers to customizer their phones, rivals Verizon Wireless (NYSE:VZ), Sprint Corp (NYSE:S) , T-Mobile US (NYSE:TMUS) and U.S. Cellular (NYSE:USM) will only be able to offer black-and-white versions of the device.

In order to promise delivery of customized phones within four days, Motorola had contract manufacturing partner Flextronics International Ltd (NASDAQ:FLEX) build a factory in the United States.

ANOTHER PHONE LAUNCH

Rick Osterloh, Motorola's vice president for product management, said consumers have shown that they are interested in putting their personal stamp on a phone, seen in the popularity of phone cases featuring various colors and sparkly surfaces.

Motorola is still working out which wood to use, he said. Aside from cosmetic concerns, the decision will have technology ramifications because different woods "respond differently" to radio signals.

In addition to industrial design changes such as a curved back and the choice of colors, the phone's key features found in its camera and a touch-free user interface are the same as what Motorola introduced in its line-up of new Droid devices last week.

Since it bought Motorola, Google has promised that it would rationalize the company's phone range, which included as many as 45 phones in 2011. Along with the Moto X and three Motorola Droid phones, Motorola will likely have just one more phone launch this year, Osterloh said.

While the Moto X will mark Google's most significant effort to get a foothold in the smartphone hardware market, Google's Android mobile operating system already leads the pack. The software, which Google gives away free to companies including Samsung and HTC (TPE:2498), is featured on three out of every four smartphones sold worldwide, according to analysts.

Google primarily makes money off of Android from online advertising when consumers access its services on Android-powered devices.

Motorola said that Moto X would become available in Canada and Latin America as well as the United States around the same time.

Motorola said it has yet to establish a price for customers who want to pay the full retail price without signing a contract.

Shares of Google closed up 1.9 percent at $904.22 on Thursday.

(Reporting by Sinead Carew in New York and Alexei Oreskovic in San Francisco; Editing by Leslie Adler)