In light of Google’s big earnings beat on Thursday night, sending the stock surging past $1,000 to an all-time high, there was one major drag: Motorola. Kicking off the earnings call, CEO Larry Page hyped up the Moto X, which Google unveiled earlier last quarter. “Super fast and clean and the voice features are great,” Page said on the call. “While it’s still early days, Dennis and the team have already transformed Motorola’s product quality. Now they’re working to build out marketing and distribution.”
Despite the hype, Motorola had a segment operating loss of $248 million in the quarter, compared to a segment operating loss of $192 million in the year-ago quarter. Merrill Lynch analyst Justin Post pressed Google about the synergies between the two companies, Google and Motorola, as the losses continue to grow. CFO Patrick Pichette continued to reiterate that it’s still “early days” for Motorola, and that it’s more of a “fundamental kind of optimistic and recent view of the company.”
The Moto X is good phone, as I’ve tested it and played with it in the past. However, it’s not going to be enough to get Motorola to the point where it becomes accretive to Google anytime soon, and clearly the company has a lot of work to do.
Management’s focus on marketing and distribution as it relates to Motorola is important, as it seeks to become Apple-like, owning both hardware and software and becoming a one-stop shop for all things tech. However, Motorola needs to release more must-have products in order for the unit to ever meaningfully contribute to Google’s bottom line. Otherwise, it just becomes a haphazard, ugly problem that frustrates investors and ultimately, management.
Despite Motorola’s mess, Google was able to earn $10.74 per share in income while generating $11.93 billion in sales. Now imagine what it could earn if Motorola actually helped out.