Google's New Cell-Phone Universe

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The draw for developers is clear: Unlike with other mobile-platform providers, developers working with Android pay no licensing or other fees. They also will be able to sell their applications through a Google-created online marketplace without sharing revenues with the search giant. Google will make money on the ads served through the phone's browser, according to Google. Then there's the inherent PR of being associated with Android, some programmers say. "This is like a big marketing campaign for us," says Steve Chambers, president of the mobile and consumer-services division at Nuance (NUAN), which will make its basic voice-recognition program available to Android developers for free. "This will be a great way for us to seed the developer community."

Existing wireless handset makers and carriers also have incentive to back Android, which will be available to them for free. A handset manufacturer would need to invest more than $200 million to move to a new software platform, estimates John Bruggeman, chief marketing officer at Linux software company Wind River (WIND).

Unheard-of Scale

Andy Rubin, head of the Android project at Google, hopes that within five years, "hundreds of millions" of Android-based phones will be sold per year. After five years of effort, Microsoft ships about 20 million phones based on Windows Mobile each year. And Microsoft already works with more than 160 operators and 48 handset makers and offers more than 18,000 applications for Windows Mobile.

Is Rubin's dream doable? "It's unclear how they plan to get to that kind of scale," says Scott Horn, general manager for mobile communications at Microsoft. He's not the only doubter. "Let's not underestimate the complexity of this industry," says Sebastian Nystrom, a director at the technology strategy unit at Nokia. "The problem is not to just develop a device but to get it out into the hands of consumers." Indeed, the success of the Open Handset Alliance' ultimately hinges on whether consumers will bang on stores' doors asking for Android-based devices, says Envisioneering Group's Doherty.

These 34 companies believe the demand will be there. Handset maker HTC, known for stellar design and popular phones like the Touch, long pushed Windows Mobile before becoming part of the Open Handset Alliance. "Our commitment to other operating systems won't be changing," said CEO Peter Chou during a conference call announcing Android. Another supporter, Motorola, has been a user of Symbian. Its most popular smartphone, the Motorola Q series, runs on Windows Mobile.

There's a good reason why handset makers are listening. By not having to pay licensing fees to Symbian or Microsoft, cell-phone companies will save about 10% of their costs, according to Google. "They can spend that money on better components and bigger screens," says Ross Rubin, an analyst at consultancy NPD Group. Or they could simply make better phones available to consumers for less. "[The Open Handset Alliance] is a monumental development," says Helfrich. "This is going to be the event that people remember."

Kharif is a reporter for BusinessWeek.com in Portland, Ore.
With Jennifer L. Schenker in Paris.