Google's Nexus One promises new distribution channel for smartphones

Google officially debuted the Nexus One smartphone at a press event at its Mountain View, Calif. headquarters yesterday, and also unveiled a Google-hosted Web store that customers can use to purchase the phone. The company insisted that its core business remained advertising, but some analysts saw the move as a way for Google to shake up the traditional power that wireless carriers have over device sales.

The phone is available unlocked online for $529 and for $179 through T-Mobile USA with a T-Mobile Even More individual 500 Plan, which costs $79.99 per month. Unlocked, the phone will be able to access AT&T Mobility's EDGE data network.

Google Nexus OneMario Queiroz, vice president of product management at Google, said that the Nexus One is the first in a series of phones that Google will sell through this Web site. He also said that Verizon Wireless and Vodafone will sell the Nexus One later this spring. The company plans to add more operator and handset partners, and will also include devices from Motorola in the program. Initially, the phone and the Web site will be marketed online only, Queiroz said, and not in retail stores of its carrier partners.

At an investor conference, T-Mobile USA CEO Robert Dotson said he would not be surprised if all of the major U.S. operators carry the Nexus One within the next 12 months. "The carriers are losing control of the ecosystem at large," Maribel Lopez, an analyst at Lopez Research, told Dow Jones Newswires. "This is just another example."

Calling the HTC-made Nexus One a "superphone," a class of very high-end devices, Queiroz said that the company is always looking at ways it can innovate more. It decided that by working closely with its partners to bring devices to market it could showcase very quickly the software technology that Google is working on. He added the the Nexus One is an example of what's possible on mobile phones through Android.

The Nexus One is 11.5mm thin, runs on Android 2.1 with a 1 GHz Qualcomm Snapdragon processor, has a 3.7-inch AMOLED touchscreen display and a 5-megapixel camera with LED flash. Other features include a light sensor, proximity sensor and an accelerometer, as well as GPS and WiFi. Google said that tethering support would be added later to the device.

The company also highlighted the software enhancements offered by Android 2.1. In addition to live, interactive wallpapers, a new weather and news widget and new ways to view photos, the company added voice commands to all applications on the phone that have text input fields, meaning that users can dictate email and send out tweets on Twitter. Additionally, users can ask to navigate to a point of interest via a voice command, and then the Google Maps Navigation application will deliver spoken turn-by-turn directions. The company also added Google Earth to the phone.

During the event, Motorola co-CEO Sanjay Jha addressed growing speculation that the Nexus One phone sold through Google would antagonize carriers and handset makers that joined the Google-led Open Handset Alliance. Jha downplayed those concerns.  "The way I see this direct-to-consumer channel is another channel to consumers, where we can take innovations to consumers as fast as we possibly can," he said. "I don't see it as a threat. I think this an expansion of the marketplace."

Andy Rubin, director of mobile platforms at Google, said that "it's inaccurate to say Google designed the phone," and that it merely worked very closely with HTC, and is "just merchandising the phone online in our store." Queiroz said that Google would be the "merchant of record" while HTC was the manufacturer, and that Google would work with HTC on supply logistics.

Rubin said that Google's primary business is advertising, not retailing, and that the company was always looking for new ways for people to access the Internet. "I think this is just the next front of our core business," he said. Rubin also said that by selling the device online, Google "thinks that we can then, over time, lower the cost of devices and service plans because we don't have those built in things," such as outside marketing and merchandising costs.

However, some analysts were disappointed that Google did not do something more to fundamentally break up the traditional price structure of mobile phones, by doing something like subsidizing the phone through advertising revenue. 

"It would have been nice to see them roll out something really unique," Danny Sullivan, the editor of SearchEngineLand and a longtime Google analyst, told the New York Times. "It is more evolutionary than revolutionary."

Michael Gartenberg, an analyst at Interpret, praised the device and said it is "certainly state-of-the-art for what you would expect at this time in 2010." However, he said that with the phone Google was essentially getting itself into consumer electronics, and would be trying to maintain control over hardware and software, while also maintaining the Android ecosystem.

Google, he said, was "drawing a line in the sand" and saying that "while all Android devices may be be equal, there are some devices that are more equal than others."

"If you're Samsung and LG, you can't be feeling too great about what you heard today," he told FierceWireless, adding that "they basically set the bar today, and told all their licensees and said jump over it."

For more:
- read industry reaction to the Nexus One
- see this release
- see these pictures and specs
- see Google's phone Web page
- see this WSJ article (sub. req.)
- see this WSJ live blog (sub. req.)
- see this Dow Jones Newswires article (sub. req.)
- see this Dow Jones Newswires article (sub. req.)
- see this NYT article

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