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Google revamps mobile strategy with new phone Nexus One
The sleek touch-screen phone, dubbed the Nexus One, is Google’s boldest foray outside its traditional Internet home turf and represents the first time the 11-year-old company will sell a consumer electronics device bearing its well-known brand. But analysts say the phone is not as revolutionary in design as Apple Inc’s iPhone was. Tech websites and forums gave Google favorable reviews but also noted the new phone was not that different from others in the market that run Google’s Android software, such as Motorola’s Droid.
The Nexus One ships immediately and exclusively from Google’s online store for $179 with a two-year contract from Deutsche Telekom’s T-Mobile USA, or $529 without a service plan.
The more expensive unlocked phone, analysts say, is priced too high to dramatically alter the relationship between carriers and hardware vendors in which wireless service providers have traditionally controlled handset distribution in the US.
It “wasn’t the game-changer people thought it could be,” Canaccord Adams analyst Jeff Rath said. Google could have shaken up the industry by offering the device for free, but instead chose more traditional pricing, he said.
Executives said the phone could be profitable for Google, though analysts are not forecasting a revenue windfall in the short term. But the move, which Google announced at a press event at its Mountain View, California headquarters on Tuesday, raises the stakes in the fast-growing smart phone business which it entered two years ago by developing the free Android software for smart phones made by other companies.
The highly anticipated Nexus One, which Google designed in close collaboration with hardware maker HTC, could provide Google with a viable challenge to the iPhone and Research in Motion’s BlackBerry.
Google’s decision to sell its own Google-branded phones is “a sea change in terms of Google now owning the customer, making the carrier a little bit less relevant to the conversation and maintaining more control over the hardware and software experience because they realize they’re competing with players like Apple and the iPhone,” said Michael Gartenberg, vice president of strategy and analysis at market research firm Interpret.
The Nexus One is the first of a variety of smart phones that Google said were in the pipeline as the company seeks to expand its reach from the PC to the mobile world and ensure its online products and ads get prominent placement on a new breed of wireless Internet devices.
Executives said that in the spring Google will sell phones that use Verizon Wireless’s network in the United States and Vodafone’s in Europe. Verizon Wireless is a joint venture between Verizon Communications and Vodafone.
According to Forrester research, 17 percent of US mobile phone users had smart phones at the end of 2009, up from 11 percent a year earlier. Investors are taking a wait-and-see view on Google’s first effort to sell a hardware product directly to consumers.
Google’s stock has risen about 7 percent since the start of December, setting a 52-week high of $629.51 on Monday. But analysts say that was driven by improvements in its core business of Internet search advertising, rather than the prospect of tapping a new pool of revenue selling smart phones.
Google executives declined to provide financial targets for the new phone, though Vice President of Engineering Andy Rubin said the company would not lose money by selling the phone. Google worked closely with HTC to develop its phone, which uses a 1 gigahertz Snapdragon processor from Qualcomm Inc.
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