Engineers at Motorola are hard at work on a sophisticated handset—known internally as the "X phone"—but the Google Inc. unit is running into some obstacles in its effort to provide more potent competition for Apple Inc., said people familiar with the matter. Seven months after being acquired by Google for $12.5 billion, Motorola is designing its marquee handset with cutting-edge features to stand apart from existing phones when it is released next year, these people said.
But while Google is known for swift execution on the Web, its new hardware unit has run into hurdles associated with manufacturing and supply-chain management that have caused the company to rethink some initial plans for the X phone, such as using a bendable screen, these people added. The previously undisclosed development effort is a key facet of Google's strategy for boosting the minuscule market position of the cellphone pioneer, based partly on bolstering quality while reducing the quantity of Motorola products.
Motorola is primarily working on two fronts: devices that will be sold by carrier partner Verizon Wireless, such as the "Droid" line of smartphones, and the X phone, these people said. Motorola is also expected to work on an "X" tablet after the phone, the people added. Meanwhile, Google must manage complex relationships with smartphone makers that use its Android mobile-device software—particularly with Samsung Electronics Co., a Motorola rival that has become the No. 1 smartphone maker with Google's help.