An industry analyst said a Google smartphone made by one vendor would be preferable to devices that pair hardware from Motorola, HTC and others with software and services from Google. However, such a device is unlikely to ding Apple’s iPhone.
Rumors of the so-called Google Phone resurfaced Nov. 17 when TechCrunch reported that Google is building its own phone, which is being produced by a major phone manufacturer but will only have Google branding.
The report angered industry watchers who believe such a move would fracture the open-source development community that has coalesced around the Google Android mobile operating system, an open-source alternative to proprietary mobile platforms from Apple, Palm and Research In Motion. After all, the Android ecosystem appears to be flourishing, with Verizon Wireless teaming with Motorola and HTC to sell the Droid and Eris, respectively.
While tempers flared over the issue, BroadPoint AmTech analyst Mark McKechnie took a more temperate view of the idea, arguing the pros and cons of such an announcement in a research note Nov. 19. McKechnie thinks the device is a go:
““Although there has been chatter for years about a Google phone, we think this time it is different and that there may be some truth to the current news flow about a GOOG-branded phone/mobile device. While our discussions with Google have consistently elicited ‘no comment,’ the company has also repeatedly passed on the opportunity to dismiss the idea.”“
The analyst, who reported that Motorola is on pace to sell 600,000 Droid units this year, said a Google phone would be a fine growth opportunity for the search engine as it seeks to extend its tendrils on the mobile Internet.
Even though Android is getting solid traction with consumers, OEMs and wireless carriers, a Google Phone would, like Apple’s popular iPhone and RIM’s BlackBerry line, be an integrated hardware-software solution, providing smoother performance. McKechnie added:
Why a Google Phone Wont Hurt the iPhone
““Clearly, this means enabling more mobile searches, but a ‘Google phone’ would also likely include tighter integration with Google Voice, GPS-enabled directions and mapping, location-based mobile advertising, Google Checkout (currently the only accepted payment platform in the Android apps market), and many other current and future Google services.”“
By making and selling its own phone, Google would also be able to obviate the revenue sharing between Google and its carrier and OEM partners, keeping all of the sales earned from search and the handset. Google would also have better control over location-based advertising, audio ads delivered via Google Voice and other new revenue streams.
Of course, there are risks along with the benefits. For one, Google has never sold a mobile device, or hardware of any kind.
Perhaps the most prominent risk is the potential disruption Google would create in competing with those Android partners who pledged their support to the open-source platform. Google sat on the sidelines while they developed the devices, integrating Google’s applications at the end.
For example, while Motorola seems somewhat revived by the positive reception to its Droid device, the company and other Android vendors would face risks from a Google phone, making differentiation more challenging. Despite an early lead and a strong product road map for 2010, Google’s great brand could darken Motorola’s light.
“Unless GOOG hopes to have iPhone-like dominance, introducing a Google phone may actually limit the future growth of the overall ecosystem if its partners rebel,” McKechnie said.
Apple, by virtue of its singular choke point for hardware, applications and services, is best positioned to weather any Google phone attack, the analyst said. He expects 37.3 million iPhones will be sold worldwide in 2010, and said Apple could double its market share within a few years. He wrote:
““We are not too concerned about increased competition in the smartphone market and the resulting impact on Apple as we view most of the new competing products coming out as ‘kludge’ devices which assemble separate pieces (e.g. hardware from MOT, software from GOOG, etc.) and attempt to make the pieces fit into a puzzle.”“