Moto X: And the Price Wasn't Even Right

NEW YORK ( TheStreet) -- Everything I said in my recent article about my expectations for Motorola X came true, except it was one step worse.

I said the device will be mediocre compared to the best Androids that Samsung and others have to offer, but that the situation could be saved by a killer price -- just as what Google ( GOOG) does with the SIM-unlocked, contract-free, LG Nexus 4.

But in the end, it turns out it wasn't even cheaper.

And there is no new interesting sales model.

Motorola brings the Moto X to market with the same tired and expensive operator contract model that has been plaguing the U.S. smartphone market for over a decade. With the exception of T-Mobile ( TMUS), the other operators bind you for two years and charge you the equivalent of a payday loan for the privilege of carrying their SIM-locked brick until a year after its warranty has expired.

There is, as yet, no unlocked, no-contract price for the Moto X. In the meantime, the overpriced prison-style contract pricing is $200 for the 16-gig version, and $250 for the 32-gig version.

Hey, at least Motorola exposes Apple's ( AAPL) insanely greedy memory pricing by charging you only $50 for the jump from 16 gig to 32 gig. Apple charges you $100 for the identical upgrade. This tells you Apple is on the verge of a margin collapse: Competition, it hurts.

Depending on the operator and the channel, you can get a class-leading Samsung Galaxy S4 or HTC One for $100 or $200 on a two-year contract. In comparison to those, the Moto X offers you a one-year-old CPU and 720p screen resolution instead of 1080p resolution. Well, thank you for selling me a device with one-year-old specs at the same or double the upfront price!

Android 4.3: What's that?

If the hardware is a year old, surely because Google owns Motorola at least you get the very latest in software, no?

Uh, no.

Over the last week, I got Android 4.3 on my almost two-year-old Samsung Galaxy Nexus, and on my one-year-old Asus Nexus 7. Surely, the Moto X, being the very newest device made by Google's own subsidiary, launches with the latest Android software?

The Motorola X launches with Android 4.2.2, which Samsung offered back in April on its current flagship device, the Galaxy S4. Any promise to upgrade it to Android 4.3 by a certain timeframe, or at all for that matter? Not that I can find anywhere on Motorola's Web site.

This is particularly painful because of the meaningful improvements we have seen in the devices that have been upgraded from Android 4.2.2 to 4.3. Did they do this just to show that Motorola gets deliberate second-class treatment by Google? Or was Motorola too slow/incompetent to implement what Samsung, LG and Asus are already offering?

Had Google wanted to take the Motorola opportunity to shake up the wireless industry, it would have circumvented all the traditional operator channels and offered the Moto X strictly from its own Web site and other independent distributors for $299 or $349, just like the LG Nexus 4. It would have told consumers to pick up a pay-as-you-go SIM card from T-Mobile or Wal-Mart ( WMT) for $30 per device, or $100 for four lines.

Speaking of the LG Nexus 4, the Moto X actually has almost identical specs: Similar Qualcomm ( QCOM) Snapdragon CPU, similar 4.7-inch 720p screen, no removable battery or expandable storage.

The LG Nexus 4 came out last October, so perhaps LG should sue Motorola for some sort of infringement? Well, that would be ambitious given that the year-old Nexus 4 already offers Android 4.3 whereas the Moto X isn't yet in stores but will launch on Android 4.2.2. The Moto X is no threat to the LG Nexus 4.

Sarcasm aside, it does remain true that the Moto X is a perfectly fine mainstream Android, slightly above the mid-range in the marketplace. There is nothing wrong with it -- that the right price couldn't have cured.

It's easy to have sympathy for Google's dilemma here. On the one hand, it would be great if Motorola could be the dominant king of smartphones.

The problem is that it isn't. It's badly behind the other companies, most notably Samsung.

Therein resides Google's dilemma: It's got bigger fish to fry than prodding Motorola to excellence. Google's main priority right now -- after managing a 2014-2015 transition from Android to Chrome OS (Chromephone) -- is to ensure that Samsung doesn't wander off the reservation.

Google's relationship to Motorola is like Michael Corleone's relationship to his brother Fredo: You're stuck with him -- for now, anyway -- but you can't allow him to play an important role. So you make him into a nightclub promoter, giving him some money to spend. Hence the rumored fat marketing budget for the overpriced Moto X.

If Samsung got the slightest whiff that Google was giving special privilege to Motorola, it could trigger Samsung going on an all-out war against Google. That's something Google needs as much as another antitrust lawsuit, which is to say it needs to be avoided at all cost.

Make no mistake about it: Google is keeping Samsung fully briefed about what is going to happen with Motorola. Google can't afford Samsung feeling betrayed, which would result in a possible collapse of the Android ecosystem as we know it. Motorola is but a pawn in this shadow-boxing game, sort of like a Switzerland's role in World War 2 and the Cold War alike.

Or like Fredo Corleone.

Google's relationship with Samsung had started to crack in the year leading up to March 2013. By April, Google's leadership traveled to South Korea and something happened -- suddenly Google and Samsung were best friends.

Surely there were many pieces to such a peace deal, but assuring Samsung that Motorola wouldn't be used to hurt it materially was likely one component of this peace treaty.

Motorola is a decent device that's not priced to sell. That's by design.

At the time of publication the author was long GOOG, AAPL and QCOM.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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