Comments on ReCode Interview Rick Osterloh SVP Hardware Google

In the October 13, 2017 “Too Embarrassed To Ask” show from VOX Media/ReCode, Kara Swisher and Lauren Goode interview Rick Osterloh, SVP of Google Hardware. A few points stand out for me:

1) Mr. Osterloh claims he was actually hired by Google to run the Motorola unit (post acquisition), but Mr. Osterloh’s LinkedIn public profile page says he ran the Android division of Motorola Mobility back in 2007. Is Mr. Osterloh not completely pleased with Motorola’s performance?
2) When asked whether the Google Assistant feature of Google Home products is leveraging the same, familiar, web Google search service, he added “yes, but we’ve tweaked it a bit”. But he did not offer any clear assurances this leveraging is not the case.
3) Ms. Swisher started the interview by noting Google’s new call “we do hardware better than anybody else”. Unfortunately neither Ms. Swisher, nor Ms. Goode pick up on this statement during the interview. Obviously this statement voices the core of “competition to be the best”. Investors bullish on Alphabet should think about whether a strategy built around this “king of the unprofitable hill” of duplicating features, trashing prices, is a smart one promising more profitability, or not.
4) When asked about what, if any, impact concerns about consumer privacy had on the design of the Google Home product, Mr. Osterloh merely answers “if you don’t use the attention phrase, we don’t listen in”. Once again, neither Ms. Swisher, nor Ms. Goode probed any deeper on this point.
5) When asked what the key differentiator is, from his point of view, between Google’s hardware, and “everybody else”, he replied “our AI. Which doesn’t answer your question (chuckles)”.
6) When asked what drove the HTC acquisition, he answers “we hired 2K new engineers”. Once again, investors bullish on Alphabet may want to ask just why the 2K + engineers acquired from Motorola Mobility didn’t cut it, but the 2K engineers from HTC will cut it. Analysts should also take a look at the expense of moving all these people in and out of employment status at Google impacts on the bottom line.
7) Mr. Osterloh pointed to the camera features of the new Pixel phones as an example of big improvements in their hardware devices. (In a recent review of Apple’s new iPhone 8 Plus, we heard very much the same story – “the camera is terrific, 4K video, etc”) Neither Ms. Swisher, nor Ms. Goode probed further on Mr. Osterloh’s comments on this point. Too bad. Pixels & iPhones are smartphones — not cameras with phones included as accessories. Or are they? Anyone interested in what “innovation” means, should take a look at how leading manufacturers of smartphones are producing their latest models. In our opinion, “innovation” has been long gone from any of these devices. Contact us to learn more.
8) Mr. Osterloh disclosed Google Assistant is using the same prescriptive, rote, learning method as other “personal assistants” (Cortana, Siri, Alexa, etc). The lexicon is simply massively larger (he mentioned 100 million possible query strings). So the “intelligence” still isn’t their in any of these devices to “naturally” answer posed questions.


Motorola’s Moto G Does Well in Q1 2014

During Google’s Q1 2014 webcast, Patrick Pichette, CFO cited strong emerging market sales for Motorola’s Moto G smart phone: “And before I close, I want to give a brief update on Motorola. Motorola had a great quarter in Q1, with the Moto G showing strong sales momentum, especially in emerging markets.” (quoted from the webcast).

While I could find no specific detail to substantiate this claim, neither in the handouts accompanying the webcast, nor in the 8K filed with the SEC, I did find even stronger claims made on March 31, 2014 by Kantar WorldPanel Comtech: “Dominic Sunnebo, strategic insight director at Kantar Worldpanel ComTech, comments: ‘Motorola was nowhere in Europe before the Moto G launched in November last year, but the new model has since boosted the manufacturer to 6% of British sales. It highlights the speed at which a quality budget phone can disrupt a market.'” (quoted from Kantar WorldPanel’s web site).

In a November 20, 2013 post to this blog titled Channel Conflicts — Android Style: Why is the Moto G Hitting the Market, but not the Chinese Market? I noted the Moto G ” . . . sports a high resolution screen and “the latest Android” O/S, [and] is available at a very low retail price of $179.00.” But I read these strong specifications to signal Google had crossed the line, by coming to the consumer market with its own smart phone powered by Android O/S (which it “owns”, if such a term can be applied to whomever manages this type of Open Source O/S).

Comparisons with Samsung’s Galaxy 4, arguably one of the better selling smart phones offered by the largest Android OEM, were, perhaps inevitable, but who would make them, and why?

Back on November 21, 2013, Vlad Andrici published this in an article titled The Motorola Moto G: An Impressive Addition: “Motorola has compared the Moto G’s performance with the Samsung Galaxy S4, when performing minor tasks. Despite Moto G’s mid-range SoC, lower amount of RAM and less powerful graphics chip, the handset apparently manages to make a call 1.1 seconds faster than the Galaxy S4, it answers a call 1.2 seconds faster, returns home 0.5 seconds faster and boots up 5.3s quicker too.”

If Andrici’s claim is true, then this direct comparative claim of superiority over Samsung’s Galaxy S4, coming from non other than Motorola Mobility, an Android O/S handset OEM wholly owned, at the time, by Google, itself, likely made a lot of waves for the Android handset OEM channel.

Does Pichette’s remark lend credence to the notion I expressed last November? Did this handset shift the balance of the handset OEM market too much in Google’s favor? I have no information to indicate this is the case, beyond pointing to the comparatively strong performance for the handset in, at least, the UK market.

Also, the Moto G appears to be winning over precisely the right kind of customers, to ensure lots of sales volume: Kantar WorldPanel Comtech notes “The Moto G in Great Britain has attracted a very specific consumer profile. Almost half of owners are aged between 16 and 24, 83% are male and generally they come from lower income groups with 40% earning under £20,000.” (quoted from the Kantar WorldPanel Comtech article on Motorola’s Moto G. I’ve provided a link to the entire article, above).

The Moto G’s success signals likely good news for Motorola Mobility’s new parent: Lenovo. When and if someone starts selling the phone to the Chinese market, sales may really take off. Too bad Google appears to have had feet on either side of a potentially dangerous Rubicon.

Ira Michael Blonder

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