Google (GOOG) is testing a new Google touch phone, which is being referred to as “Nexus One”. The company has distributed the device to employees across the world, intending to use their feedback for improving the phone. Employees say that the Nexus phone is a device running the new 2.1 Android operating system, manufactured by Taiwanese phone maker HTC to run on GSM technology.
Users would be able to choose their carrier from a drop-down menu. Accordingly, since the phone uses GSM, carriers T-Mobile and AT&T (T) are the logical choices in the U.S. In the U.S., it is normal for phone makers to partner with carriers who subsidize the phone in exchange for a long term contract with the buyer.
However, this is not the case in some emerging markets, where it is customary to choose the phone first and then the carrier that one considers most reliable. Therefore, Google’s strategy would work well in these markets. The competitive scenario in the U.S. would be scrambled however, with the company pitted against its own partners.
First in line would be the recently launched Droid from Motorola (MOT), which is currently being sold by Verizon Wireless (VZ). It could also alienate Samsung, which is working on phones based on the Android operating system. The Apple (AAPL) iPhone is likely to be the strongest competition, followed by Research in Motion’s (RIMM) Blackberry.
Carrier Sprint Nextel (S) could also be put out. The phone doesn’t come as much of a surprise to us, although we did not expect it to be as soon as next month, as some people have rumored. The recently announced Android numbers for Western Europe throws light on the situation.
According to IDC, smartphones running Android operating systems in this key market grew very slightly to around 5.4% of the total market, while both the iPhone and Blackberry continued to drive sales. According to IDC, consumers had little appetite for the Android phones, which were mostly pushed by carriers.
The reason Google is facing these issues is the fact that Android is an open source customizable platform that allows different versions to be created for different phones. This means that different applications would have to be written for each different version, making it very hard for the application writers to make any money. In the current situation, writers naturally prefer to write apps for the iPhone or the Blackberry.
The fact that these operating systems already have a head start over Android doesn’t help either. The smaller number of apps makes the Android phones less attractive. Google’s decision to come out with its own phone was the only possible solution to the problem. It will now be able to sell its own brand without confusing customers and will also be able to get more applications written.
Another point to note is the fast growth in the mobile search business, which is set to outpace growth in the computing platform. Google needs to build its own share and needs to do it fast, if only to maintain its position in search.
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