Google Nexus One Smartphone Is a Profitable Business, CFO Says

By Clint Boulton  |  Posted 2010-04-17

Google CFO Patrick Pichette characterized Google's Nexus One as profitable, answering one of the nagging questions financial analysts posed soon after the device launched Jan. 5.

Google offers the Android 2.1-based Nexus One unlocked through its Webstore for $529 or for $179 with a two-year contract from T-Mobile.

Mobile analytics firm Flurry triggered concern about sales of the device March 16 when it said that Google sold only 135,000 units of its Nexus One smartphone through its first 74 days on the market. 

By comparison, Apple sold more sold more than 1 million units of its first-generation iPhone through the same time. Verizon also shipped more than 1 million units of the Droid through 74 days.

Measured against those gaudy statistics, the Nexus One seemed to be a failure, and analysts attributed the paucity in interest to Google's sale of the device solely through its Webstore.

Google executives were upbeat about the Nexus One and Android smartphones overall on the first-quarter earnings call April 15. Pichette confirmed the Nexus One was a profitable business, though he wouldn't disclose how many of the devices have been sold or other core economics.

Broadpoint AmTech analyst Ben Schachter said he estimated Nexus One unit sales at 200,000, contributing $106 million, or 2 percent, of Google's net revenue. That figure stands to increase when Verizon Wireless, Vodafone and Sprint begin offering wireless plans for the device this year.

Jeff Huber, senior vice president for engineering, said on the call that Google is "very happy with the device uptake and the kind of impact that's had across the industry in terms of raising the bar and peoples' expectations of what a great smartphone can do."

He declined to say whether the phone might be sold by carriers through their retail stores, but he did claim Android is gaining a lot of momentum. He said the OS is shipping on some 60,000 smartphones and activated each day, spanning 34 devices from 12 OEMs.

The Android Market now features 38,000 applications. While the number of Android apps is still a far cry from the 185,000-plus apps in Apple's App Store, Huber said the number of Android apps is up 70 percent quarter-over-quarter.  

Huber made it clear the goal is to get more people using smartphones and seeing more mobile ads.

To that end, Google is working on specialized mobile ads, including those that provide users with click-to-call options. These business ads feature links that let users click to call the business to get more information about products and services.

J. Gold Associates Jack Gold said that while many people are bashing Google for only selling 200,000 Nexus Ones, analysts should look at what Google has gained from building the Nexus One.

This includes information for itself and Android developers about mobile use from applications and ads, as well as feedback on the Google's direct sales model via its Webstore.

"For Google, it was never about trying to out-compete iPhone or selling more devices than BlackBerry or HTC or Moto [who also sell Android phones, but with their 'overlay' on top]," Gold said.

"It wasn't about Google becoming a phone company. It was about Google getting a significant number of devices out there to form a big 'reference platform' testing/pilot environment where they could model, test and tune their ecosystem based on the real life use of the early adopters who would buy Nexus One."

By testing the market waters with the Nexus One and its new Webstore, Google laid a foundation it can build on for more mobile initiatives later on, including more Android phones.

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