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Google's Moto X Phone Aims at Apple's Core

Stocks in this article: GOOG AAPL MSI

NEW YORK ( TheStreet) -- Google (GOOG) is looking to step up its presence in mobile devices later this year with the release of the Moto X, which will be the first smartphone manufactured by Motorola (MSI) to be assembled in the U.S. The offering is expected to create new challenges for Apple (AAPL), as the device will be more aware of its surroundings and capable of anticipating which features its user is likely to run next, in addition to being priced more cheaply in an effort to pressure the high profit margins Apple products generate.

The phone (previously rumored to be called the X Phone) was announced at this week's D11 conference in California, and marks Google's entrance into the "hero" phone space with products meant to compete directly with flagship handsets such as Samsung's (SSNLF) S4 and Apple's iPhone. So far, the Moto X is being sold on the idea that it will better anticipate the needs of its user, and allow for a higher level of interaction than the devices available now.

The new phone will include sensors (such as its accelerometer or gyroscope) which will run constantly and enable the phone to understand when it is being taken out of the pocket or travelling at high speeds. With this information, the phone will attempt to predict its next intended use and respond accordingly. If the phone expects its user to take a picture, for example, the camera app will be opened in advance.

Its pricing is expected to be well below that of the iPhone 5. Prices are declining steeply for most consumer electronics items, so it's not surprising to see Google and Motorola use these trends as a strategy for cutting into Apple's market share.

Early comments from Motorola have not named the iPhone, but "high-margin" products have been mentioned specifically. With products like the iPhone earning margins above 50%, a correction back toward market averages looks overdue.

At this stage, Google appears to be preparing itself for this correction and it seems the Moto X will not experience Apple's margin restraints. This puts it in a better position, as it is becoming more and more likely that the elevated margins in consumer electronics will fall.

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