Motorola makes a tiny profit on every Moto G sold

Moto G

Back in November when Motorola announced the Moto G, the extremely low price point of the handset took everyone by surprise. Everyone thought that Motorola was selling the Moto G on loss, but that rumor was dismissed by a Motorola spokesperson, confirming that the company makes money on every unit sold. 

Now, according to a research firm – TechInsights – the component cost of the 16GB edition of the Moto G comes in at around $123. After taking overheads for loyalties, packaging, marketing etc, Motorola manages to make an operating profit of less than 5%, on its price of $199, according to an analyst from Sanford C. Bernstein.

The 5% profit that Motorola makes on the Moto G is significantly less than what Apple, Samsung and HTC make from their devices. However, this move from Motorola has put pressure on these companies, forcing them to re-evaluate their pricing strategy. Indirectly, this will also put pressure on chip makers, component makers for OEMs and factory operators. While lower prices are always better for consumer, they are always frowned upon by OEMs.

While Motorola has suffered more than $2 billion in loss since it was purchased by Google, the company has come up with two of the best handsets for this year. The Moto X stands out from the competition and spec wars, and the Moto G offers a stellar mid-range phone at a very tempting price.

Via – WSJ

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  • KJ

    The 5% profit is on components. It doesn’t take the other costs involved in making the smartphone into account – employee salaries, marketing, supply chain management and a whole lot of other costs. If the 5% doesn’t cover these costs, it’s not going to put pressure on anyone but Motorola in the long term.

    • MasterElwood

      Motorola is owned by Google. Google wants to put more phones in peoples Hands. They don´t care about a profit from the hardware.

      • Kiwiholden

        Good point and if they pull new customers from apple then they’ll make their money from their services

    • brilea

      No, the 5% profit margin is taking into account all costs. Reread the article.