If the news that a software heavyweight is muscling its way into the mobile device arena sounds familiar, it should. Just nine days after Microsoft unveiled its Surface tablets, Google (GOOG) launched the Nexus 7, a 7-inch Android 4.1 tablet priced at $199. The low-price tablet isn’t likely to do much for Google’s bottom line in the near term, but it could be a very effective loss leader for the company if it builds momentum and market share for the Android operating system.
For Google, Android is a way to make sure that its content offerings (search engine results, YouTube, Google Maps, Google Play, etc.) permeate the mobile user’s experience. The more Google pages we all view, the more ads Google can sell. And even without its own hardware, Google has been doing a great job growing Android; the company says it is now activating a million Android devices a day.
So why does Google need to compete with its manufacturing partners by undercutting their prices? Analysts say the company saw an opportunity to sell a low-price, high performance Wi-Fi tablet and wanted to make sure that this market didn’t go to Apple or Amazon. “I think they’ve identified a microsegment within the tablet space,” says Jefferson Wang, partner at IBB Consulting. “It breaks the dichotomy that exists presently between low-priced, low performance devices and over-priced, high spec devices,” adds Jan Dawson of Ovum.
The Nexus 7 is powered by a quad-core Tegra 3 chipset, includes NFC and GPS, and is available with either 8 GB or 16 GB of storage. (The 16 GB version will retail for $249.) Google is taking pre-orders online, and this morning reports surfaced that the Nexus will be available in UK retail stores by the end of next month.
The global tablet market is expected to double in size to about $80 billion this year, according to Shaw Wu of Sterne Agee. IBB’s Jefferson Wang thinks the Nexus will end up with a respectable portion of the market. “If you look at the four P’s of launching a device, Google has covered them,” he says. “They did a good job with the product, they got the pricing right, they have a good promotion with a credit for free content, and the placement is good — they are distributing directly to consumers through Google Play and creating their own customer care center.”
The Nexus may be in direct competition with other Android tablets, but Google is clearly focused first on Android, regardless of the hardware. Yesterday the company released a platform development kit to chipset designers and manufacturers, which should mean that makers of Android devices will ultimately spend less time configuring software that interfaces with the chips in their smartphones and tablets. This should mean new Android devices can come to market faster.
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