Bloomberg News

Google Unveils Mobile Devices to Step Up Apple Challenge

October 30, 2012

Google Said to Plan Unveiling Mobile Devices in Apple Challenge

Eric Schmidt, executive chairman of Google Inc., speaks during a Sept. 25, 2012 news conference in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Google Inc. (GOOG:US) announced a new lineup of mobile devices, using alliances with South Korean electronics makers Samsung Electronics Co. (005930) and LG (066570) Electronics Inc. to step up a challenge to Apple Inc. (AAPL:US) tablets and smartphones.

The new phone, developed with LG, is called the Nexus 4 and boasts a 4.7-inch display and tools for sharper photo taking, Mountain View, California-based Google said yesterday in a statement. A new tablet, made by Samsung, is called Nexus 10 and has a higher resolution screen and costs $399 to $499, depending on how much storage it includes. Both are part of the Nexus line of electronics, which showcase the most advanced features of Google’s Android software.

Google has expanded into mobile software and hardware to lessen its dependence on Web search and widen a beachhead in the growing market for advertising on wireless devices. Based on second-quarter results, the company is on pace to generate $8 billion in mobile-ad revenue on an annual basis, Google said Oct. 18. While Android has the biggest share of smartphone software, Google lags behind Apple in tablets.

“Google’s big problem at the moment is that Android, unlike in smartphones, is not really going anywhere in tablets,” said Carl Howe, an analyst at Yankee Group in Boston. “It’s struggling to figure out what it wants to be.”

Google also added features to the Nexus 7, an Android tablet with a 7-inch screen introduced with Taiwan’s Asustek Computer Inc. (2357) in June. Google said the price of the 16-gigabyte version dropped to $199 from $249. It also added a $249 edition with 32 gigabytes of memory. A $299 version will feature access to wireless networks, including AT&T Inc.

LG rose 0.9 percent to 75,700 won at the close of Seoul trading today while Samsung slipped 0.1 percent.

Smartphone Leadership

Google made headway in the smartphone market through its acquisition of Motorola Mobility Holdings this year and by forging partnerships with a broad range of other manufacturers, including Samsung, the biggest maker of smartphones. Android had 64 percent of the smartphone software market in the second quarter, up from 43 percent a year earlier, according to Gartner Inc. Apple’s share rose to 19 percent from 18 percent.

While Google doesn’t charge for Android software, it makes money from advertising and from fees for its “Google Play” store. The company’s revenue tied to mobile businesses is on pace to reach $8 billion on an annual basis, Chief Financial Officer Patrick Pichette told analysts this month.

Google has fared more poorly than Apple in tablets in part because Android has fewer downloadable games, productivity tools and other applications tailored specifically for tablets.

Tablet Laggard

Many of the apps on Android tablets are just enlarged versions of what would otherwise go on smartphones, said Michael Gartenberg, an analyst at Gartner Inc.

“It became an issue of: ‘Where are the apps?,’” Gartenberg said. “If all you’ve got are smartphone apps that are kind of blown up to the big screen and don’t really take advantage of the tablet, consumers aren’t going to be interested.”

Apple added to its tablet lineup last week with the iPad mini, a smaller version boasting a 7.9-inch screen. Apple will probably expand its tablet market share to 60 percent in 2016 from a projected 58 percent this year, according to Gartner. Android will have 30 percent in 2016, compared with 40 percent this year.

Samsung’s new tablet is targeted at earlier, larger versions of the iPad, Howe said.

The 10.1-inch device, which features a screen with 300 pixels per inch, is available with 16 gigabytes or 32 gigabytes of memory. The battery provides as many as nine hours of video playback and more than 500 hours of standby time.

Google Play

The Nexus 4 phone, which can be bought with a contract or unlocked, lets users recharge the device wirelessly, using a charging surface.

The new phone and tablet will be available starting Nov. 13 through the Google Play store and in outlets in the U.S. and other countries.

The new devices feature the latest version of Google’s Jelly Bean Android software. One of the new capabilities, called Photo Sphere, lets users create 360-degree pictures. The new version also offers Gesture Typing, which speeds up the process of entering letters.

The Google Play store, which features movies, music and books, is adding more content, including new partnerships with Time Warner Inc. (TWX:US) and Warner Music Group.

‘Why Android?’

Aside from Apple, Google also competes with Amazon.com Inc. and Microsoft Corp., which yesterday unveiled a new version of its software for smartphones and last week made its first foray into the hardware market by releasing the Surface tablet.

The Nexus 7 has garnered positive reviews for ease of use and lured consumers with a $199 price tag. The company has probably sold 800,000 to 1 million Nexus 7s in the third quarter, according to Gene Munster, an analyst at Piper Jaffray Cos.

Still, that pales in comparison with the 14 million iPads that Apple sold during the quarter.

“Nexus will continue to be a showpiece rather than a true competitor in the mobile market,” Munster wrote in an Oct. 19 research note.

The Nexus 7 will probably lose some of its allure now that Apple has unveiled the iPad mini, Gartenberg said.

“What they’re going to have to come up with is an answer to the fundamental consumer question, ‘Why should I buy this instead of an iPad?,’” Gartenberg said. “And for the most part, Android tablets have not done a good job answering that question.”

To contact the reporters on this story: Jun Yang in Seoul at jyang180@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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