SAN FRANCISCO (Reuters) – Google is expected to unveil its highly anticipated Nexus One smartphone today, marking a first foray into an increasingly crowded market that could shape the future of the company’s advertising business.
Gadget lovers around the world will focus on Google’s corporate headquarters in Mountain View, Calif., where the Internet search leader is expected to announce the phone. But the tech world’s fascination has not carried over to Wall Street, which is 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 smartphones.
Unlike Apple’s iPhone, which upended the mobile phone industry when it was released in 2007 and has helped propel Apple’s stock more than 70 percent since, Google’s Nexus One phone appears to be less of a game-changer — at least from what is known about it so far.
“There’s really not much that’s groundbreaking at this stage,” said UBS analyst Brian Pitz.
Many of the details of the Nexus One — which Google has yet to confirm actually exists — have trickled out via various Internet blogs, media reports and analysts in recent weeks, including technical specifications and pricing.
Early reviews in Barron’s and the Engadget.com blog depict a device not drastically different than existing smartphones that feature Google’s Android software, such as the Motorola Inc Droid and the HTC Hero. The phone has a large touchscreen, 4 gigabytes of flash memory and a 5 megapixel digital camera, as well as the latest, 2.1 version of the Android operating system, according to the reviews.
“Most investors would be neutral on this event near-term,” said Kaufman Bros analyst Aaron Kessler.
“Longer-term, people are looking for stuff outside of search to drive revenue growth, but I don’t think there’s an expectation over the next year or two that that really happens from mobile in general.”
Mystery Surrounds Nexus One
Technology blog Gizmodo.com last week said the Nexus One will be available for $180 with a two-year contract from Deutsche Telekom’s T-Mobile USA, or for $530 for consumers who prefer to buy the device without a carrier contract.
Those prices are comparable to other smartphones on the market and unlikely to be “disruptive” to the industry’s existing price plans, Goldman Sachs analyst James Mitchell wrote in a note to investors last week.
Many analysts view Google’s entry into the smartphone market as a means to bolster its position in the nascent mobile advertising market, rather than an indication that Google intends to become a major player in the hardware business.
“I don’t think they have aspirations of selling a million of these units,” said UBS’s Pitz.
In November, Google said it would buy mobile advertising firm AdMob for $750 million, its third-largest deal ever.
According to some analysts, the Nexus One phone will provide Google with valuable first-hand knowledge about the mobile market as it seeks to expand into the Web’s new frontier. Google may also see the Nexus One as a way to exert more control over the design of Android smartphones, instead of being beholden to its partners for innovation.
But the move is not without risks. By selling its own device, Google may upset partners like Motorola, who currently sell phones based on Google’s Android software and would compete with Google.
And Google lacks experience selling consumer hardware and providing the kind of telephone technical support typically expected by consumers.
The answers that Google provides to those questions on Tuesday, as well as the opportunity that Google sees in the broader mobile advertising market, will be as important as the bells and whistles of the new device, analysts say.
“The overall adoption of mobile Internet, regardless of the platform, is what is more important from an investment perspective for Google,” said Needham & Co analyst Mark May.