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Why the Razer Phone Won't Succeed

Razer, which is known for is gaming-oriented accessories as well as its gaming-oriented laptop computers, recently announced its first foray into the smartphone market with a device called the Razer Phone.

The device is marketed explicitly at "mobile entertainment," which presumably means movies, music, and, of course, games.

Image source: Razer.

The phone does seem to be designed as the type of smartphone that a hardcore PC gaming enthusiast would enjoy. It has a huge battery, a fast and sharp display, robust audio capabilities, and a lot of system memory. To achieve these beefy specifications, Razer built a relatively large, heavy device with big bezels. Razer is clearly betting that the target demographic for this product would easily trade aesthetics for better specifications and capabilities. And I think they'd be right.

Even though Razer seems to have built the sort of device that gaming enthusiasts themselves would probably put together if given the option to assemble their own phones, I don't think this phone will succeed in the marketplace. Here's why.

Who wants a gaming smartphone?

I think Razer's problem won't be that it didn't build the right product for the demographic that it's targeting -- on the contrary, Razer's understanding of its target market seems quite excellent. Instead, I think the target market that Razer is going after with this product just isn't that big.

It's easy to make the case for gaming-specific notebook and desktop computers: Mainstream computers that aren't specifically tuned for gaming applications simply can't play the latest games the top game developers put out.

Image source: Razer.

It's harder to make that case for a gaming smartphone. The Razer Phone includes a Qualcomm (NASDAQ: QCOM) Snapdragon 835 processor, so it should be more than capable of playing the most graphically intensive mobile games available. That's good, but the Razer Phone is hardly the only Android to incorporate a Snapdragon 835 chip -- it's been powering Android flagship smartphones for about seven months now.

Compounding the issue is the simple fact that mobile-game developers aren't going to take their time to develop games and features that'll work only on smartphones with Razer Phone-class hardware.

Mobile-game developers tend to benefit when their games are used by as many smartphone users as possible. This means that it'd be a poor business move for any mobile game developer to invest heavily in building games that only work well on devices with Razer Phone-class hardware.

Razer's late to the Snapdragon 835 party

And just to rub salt in the wound, Android flagship devices are likely to transition to Qualcomm's Snapdragon 845 platform next year, which should offer graphics and CPU performance enhancements over the Snapdragon 835 used inside this year's Razer Phone.

Unless Razer somehow manages to quickly update the Razer phone to take advantage of this new chip once it launches -- something that's probably unlikely, since low-volume smartphone vendors like Razer tend not to get dibs on Qualcomm's latest processors -- it'll soon not even have the Android phone performance crown.

The very demographic that Razer is targeting -- enthusiasts who care about specs, speeds, and feeds -- will have a hard time buying something like the Razer Phone at the $699 price Razer is asking if it doesn't even have the latest Qualcomm processor inside.

Foolish takeaway

While I appreciate that Razer is trying to find a segment of the smartphone market that isn't explicitly being served by other vendors and try to exploit that niche, I think the Razer Phone won't find significant success in the marketplace.

My guess is that this version of the phone will soon be discounted and that the product category will die off after another iteration or two.

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Ashraf Eassa owns shares of Qualcomm. The Motley Fool owns shares of Qualcomm. The Motley Fool has a disclosure policy.