Nexus One: $199 On January 5th?

[AndroidConservative]

I think the $199 price tag rumor is logical, in that, as was stated before, many people are anticipating this handset, thus, a ton of people are going to purchase it. Not only that, I sense that Google would put out "paid" apps my specifically by them and branded by them, which would bring in more money. Going bankrupt is not something Google would have to worry about. In fact, they stand to make a killing by selling it at this price.

 

[Stormin]

I think the $199 price tag rumor is logical, in that, as was stated before, many people are anticipating this handset, thus, a ton of people are going to purchase it. Not only that, I sense that Google would put out "paid" apps my specifically by them and branded by them, which would bring in more money. Going bankrupt is not something Google would have to worry about. In fact, they stand to make a killing by selling it at this price.

I agree. Google stands to corner the market or at least take a big slice. I'm sure they have studied the market and trends and are reading these posts. They know that a lot of people are waiting to buy this phone and the more speculation the more people want it.

 

[momoceio]

I like how they're marketing it so far. I mean, being discrete and hiding things until last minute seems to work for Apple so maybe it will help Google out. If they really are trying to get a piece of the mobile phone market share, I hope they release some good TV adverts that relate to the younger crowd. That's where Apple pulls people in, with their advertising and marketing.

 

[tenma]

Why are people so quick to dismiss the $200 price tag. It does not impossible, but it's possible Google is simply doing this to gain market share in the mobile industry.

$700 loss per phone is a bit ridiculous to claim. Also, don't forget that gaming consoles are sold at losses as well (I know, they get it back from software licensing).

Saying "it's not impossible" isn't a very compelling argument. It's also not impossible that Google will pay me $1000 to accept their phone, however it is highly improbable because there is no business sense in it.

If you want to convince me that Google will provide a $300-400 subsidy for me to buy their device, then give me a convincing argument on how Google is going to recoup $300 worth of profit from me owning a Nexus One.

Let me put it another way: If Google is offering a $400 subsidy and charging $200, then Microsoft or Google's other competitors could just buy millions of units and throw them in a landfill if they want to really hurt Google.

 

[hughfitzgerald]

If Google is offering a $400 subsidy and charging $200, then Microsoft or Google's other competitors could just buy millions of units and throw them in a landfill if they want to really hurt Google.

I'm fairly certain that would be illegal anti-competitive behavior.

Okay, not really, but that would never happen.

 

[cigar3tte]

Saying "it's not impossible" isn't a very compelling argument. It's also not impossible that Google will pay me $1000 to accept their phone, however it is highly improbable because there is no business sense in it.

If you want to convince me that Google will provide a $300-400 subsidy for me to buy their device, then give me a convincing argument on how Google is going to recoup $300 worth of profit from me owning a Nexus One.

Let me put it another way: If Google is offering a $400 subsidy and charging $200, then Microsoft or Google's other competitors could just buy millions of units and throw them in a landfill if they want to really hurt Google.

So why doesn't Yahoo just buy all the XBoxes and dump them in a landfill?

 

[chicago_cws]

Saying "it's not impossible" isn't a very compelling argument. It's also not impossible that Google will pay me $1000 to accept their phone, however it is highly improbable because there is no business sense in it.

If you want to convince me that Google will provide a $300-400 subsidy for me to buy their device, then give me a convincing argument on how Google is going to recoup $300 worth of profit from me owning a Nexus One.

Let me put it another way: If Google is offering a $400 subsidy and charging $200, then Microsoft or Google's other competitors could just buy millions of units and throw them in a landfill if they want to really hurt Google.

I seriously doubt this device costs Google that much. That is a pretty tidy sum of money. I don't pay for Google Search, Gmail, Google Docs, Google Maps, etc.. but Google still seems to know how to make money. My biggest fear with this device would be that Google will find a way to sell advertising on it and that might get a bit annoying.

And one reason that some company doesn't buy millions of $200 Google phones and throw them in a landfill is because that would cost the $200 million dollars which is some pretty significant money.

Anyway, exciting to see what the next 10 to 15 days will bring as more information flows in. I am glad I waited and didn't cancel my TMobile contract to pick up and Eris.

 

[Crude]

It's nothing but naive to think this rumor is true... Google will not be giving away phones. When was the last time any company gave away a high quality electronic device?

Sony -PS3
Microsoft - xbox 360

This seems to be becoming a marketing strategy to gain market shares. Eat a comparably small equipment fee and gain market shares in return. Make no mistake, google is already a monster. It would not be hard for google to give away handsets and still turn a profit in embedded advertising. Take a look at google maps, they are already advertising in your 600$ handset. Also it would be prudent to point out that just because a carries says your getting a $600 handset for $200 doesn't mean they actually paid $600 for it. A friend of mine that deals with distribution has told me many times carries pay only a small amount more then we do with a 2 year contact. Part of their "discount" over MSRP comes from the bulk of their purchase.


Either way, no one here is going to argue that carriers aren't over charging their customers AND that the contracts are overly one sided. Googles entrance to this game will hopefully change things up. There was a time not long ago where we actually paid for internet by the minute or Kb....

I think google is headed toward all out data plans. Completely cutting out voice services. With their acquisition of gizmo5 this seems the most prudent move of Google. Since Google has no network of their own the are still obligated to make the current carriers happy, until a time that they can acquire one of the current carriers......see where I'm going with this?

 

[ari-free]

google doesn't want everyone going to apple, which would have veto power over things like voice and latitude
People on blackberry end up using BBM
And Microsoft would ditch even google search from WinMo

 

[Stormin]

Saying "it's not impossible" isn't a very compelling argument. It's also not impossible that Google will pay me $1000 to accept their phone, however it is highly improbable because there is no business sense in it.

If you want to convince me that Google will provide a $300-400 subsidy for me to buy their device, then give me a convincing argument on how Google is going to recoup $300 worth of profit from me owning a Nexus One.

Let me put it another way: If Google is offering a $400 subsidy and charging $200, then Microsoft or Google's other competitors could just buy millions of units and throw them in a landfill if they want to really hurt Google.

Radio Shack is selling the Palm Pixi for $29.99. Who is subsidizing that?

 

[hazydave]

Why are people so quick to dismiss the $200 price tag. It does not impossible, but it's possible Google is simply doing this to gain market share in the mobile industry.

$700 loss per phone is a bit ridiculous to claim. Also, don't forget that gaming consoles are sold at losses as well (I know, they get it back from software licensing).

The $700 cost per phone (or even $599, which I think is the official MSRP for the DROID) is complete fiction. Not that you don't pay that... if you want an unlocked DROID, you can buy one on Mot's web store for just that $599.

The point here... you really don't pay full MSRP for any other consumer item. A few things, like iPods and Nintendos are price controlled, but most consumer electronics are very heavily discounted. And even the MSRPs are set based on competition.

None of that happens in the US cellphone market -- you get a subsidized price that basically reflects the tier of phone you're buying. $10-$20... basic dumb phone (probably some are free online this month). $40-$60, beefed up web/multimedia phone. $100, very basic smart phone or high-end "lifestyle" multimedia phone. $200 gets you the premium smart phone. Nothing at all is based on the actual MSRP, but that's good, since the actual MSRP itself is largely a work of fiction.

If you want to guesstimate the actual retail price of a smart phone, were there no subsidies, price something similar. For example, the typical Smart Phone isn't much different these days than an iPod Touch or a Zune HD. Add a $5.00 cellular modem, a $2.50 CMOS camera, not much else... you probably already have Wifi, Bluetooth, fast applications processor, 3D graphics, etc. Now triple that cost, and you'll find the real-world change to MSRP in a competitive market. Or, just figure the "phone" version is about the same price as the non-phone version with flash upgrade (eg, the 16GB phone probably runs about the price of the 32GB non-phone).

So, could an Android phone be sold, profitably, at $200? Maybe.. I found the Zune HD on Amazon for $200... so yeah, an Android phone could definitely be sold, unlocked, at a profit, for $200. A really competitive one? That might run a bit more, but if Google really wanted to push these out with no profit at $200 or subsidized at $100, they could.

The problem I have with the claim is Google's incentive. Their move into smart phones was clear - they needed to prevent control of the smart phone market (and thus, smart-phone driven web search) by any company, such as Apple or Microsoft, who might be able to lock down the browser and/or search engine default (which is certainly the case on the iPhone... Apple won't let you use any other web browser). This is clear. But they did this, Android is now, after a year, the fastest growing smart phone platform, with support from every major cell phone maker except Apple, Palm, and RIM (even Nokia is using it on a tablet... Nokia's already supporting two smart phone OSs, neither of which has been successful in the USA, so it's quite possible they'll support Android at some point).

 

[Brickz187]

Fact is I'm on Sprint and this means nothing to me. Plus the Nexus is an ugly phone to begin with. Why would I wait for Google's version of the Hero when I can just go out and buy the Hero right now? I have no intention of using GTalk as text since I know no one who uses it and VOIP sucks. So no thanks for me. This phone is being hyped for one reason and one reason only, being THE "Google Phone" Nothing about this phone is exciting except for maybe pushing other carriers to update to Android 2.1.

 

[jamespg81]

If we can get it on sprint sign me the f up!! Im stuck for now,but id buy this phone in a heartbeat!!!

 

[Rix]

Fact is I'm on Sprint and this means nothing to me. Plus the Nexus is an ugly phone to begin with. Why would I wait for Google's version of the Hero when I can just go out and buy the Hero right now?

I hope you're not trolling. Anyway, the Nexus One is light years ahead of the Hero. Not only in software, but hardware. Maybe you should compare the specs of the Nexus One and the Hero yourself.

I have no intention of using GTalk as text since I know no one who uses it and VOIP sucks.

VOIP sucks? That doesn't even make sense. It's just like calling but instead of going over the airwaves as a call, it is data.

This phone is being hyped for one reason and one reason only, being THE "Google Phone" Nothing about this phone is exciting except for maybe pushing other carriers to update to Android 2.1.

It's being hyped because its going to be goddamn awesome.

 

[JimmyHat]

Google definitely has enough money in the bank to make this phone a loss leader. Look what Sony has done for the PS3.

 

[Rix]

Google definitely has enough money in the bank to make this phone a loss leader. Look what Sony has done for the PS3.

Yeah, Sony's doing great now thanks to their loss leader. Oh wait...

 

[alamoe]

Fact is I'm on Sprint and this means nothing to me. Plus the Nexus is an ugly phone to begin with. Why would I wait for Google's version of the Hero when I can just go out and buy the Hero right now? I have no intention of using GTalk as text since I know no one who uses it and VOIP sucks. So no thanks for me. This phone is being hyped for one reason and one reason only, being THE "Google Phone" Nothing about this phone is exciting except for maybe pushing other carriers to update to Android 2.1.

You must not have seen the specs.
Google's Nexus One Specs Leaked - PC World

 

[alamoe]

I hope you're not trolling. Anyway, the Nexus One is light years ahead of the Hero. Not only in software, but hardware. Maybe you should compare the specs of the Nexus One and the Hero yourself.


VOIP sucks? That doesn't even make sense. It's just like calling but instead of going over the airwaves as a call, it is data.


It's being hyped because its going to be goddamn awesome.

Amen

 

[lekky]

In the UK, go into a mobile phone store and they have PILES and PILES of PS3s and XBoxes stacked up. They hand these out FREE when you take out a contract via them. And not a massive one here, I'm talking about

 

[epuiatti]

It only costs Apple $178 to build the iPhone... Apple's iPhone 3G S Dissected: What's the Real Cost?

The components are virtually the same, why would it cost Google more? Especially seeing as they would be buying in bulk i would expect the price to be driven down even further.

 

[Mykpfsu]

It only costs Apple $178 to build the iPhone... Apple's iPhone 3G S Dissected: What's the Real Cost?

The components are virtually the same, why would it cost Google more? Especially seeing as they would be buying in bulk i would expect the price to be driven down even further.

And Apple doesn't buy in bulk considering most of the parts between the 3G and 3GS are the same? Also the more you build of something the more price goes down over time. But when you first start out manufacturing costs are the highest. Also the Iphone may cost $175 to make. But how much does an unlocked on cost?
Google has a few options for Nexus. They can A) sell it unlocked at around $400-500 (since the Eris is $375 on ebay $400 may be too low), B) They can subsidize the phone somehow (most likely Tmobile contract or fantastic number of ads on the phone) or C) being like the console makers and sell it at a loss in the hope of gaining market shares.

 

[epuiatti]

Also the Iphone may cost $175 to make. But how much does an unlocked one cost?

Being locked or unlocked is totally irrelevant to the price of manufacturing the phone and its physical components e.g. Locking an iPhone to AT&T does not make the cost of the LCD screen for Apple less...

Also the more you build of something the more price goes down over time. But when you first start out manufacturing costs are the highest.

The Nexus One is being manufactured by HTC and i think we can both agree that HTC is fairly well established and not just "starting out", therefore they will be able to purchase components at wholesale prices and that $200 is not an unreasonable cost for a device like the Nexus One.

Apple doesn't buy in bulk considering most of the parts between the 3G and 3GS are the same?

I dont understand... The parts are the same but they dont buy in bulk??

 

[hazydave]

Google definitely has enough money in the bank to make this phone a loss leader. Look what Sony has done for the PS3.

Sony had a big incentive with the PS3 -- they make money on every game sold, and they also needed it to shore up the success of the Blu-Ray format. Sony's fallen a bit in the games market, but at their peak, 40% of all Sony profits (and this is particularly amazing if you look at all the stuff Sony's into, electronics, music, film, etc) came from PS1 and PS2 games. So this was very critical to Sony's future. And, as usual in this kind of business, the PS3 certainly started out as a loss leader, but over time, they cost reduce it, and the hardware can become profitable on its own.

The question about Google is: where is their advantage? They entered the phone market with the clear need to ensure that mobile search and other web services -- their main source of income -- did not get dominated by some other company. You can imagine Microsoft locking in default search to Bing on the Windows Mobile platform, and others might start their own services, or make a strategic deal (as RIM just did, pushing out an update that, well, locked their default search to Microsoft's Bing). As folks transition from the desktop to the handheld increasingly for search, Google needed to at the least keep others from controlling it (they haven't really needed to lock it in... people tend to use Google simply because it's better).

But they get this with every company using Android on their phones. So what's the big advantage to OEMing their own branded phone? Without some significant advantage, they certainly still could sell it cheap, even at a loss. But where's the motivation? I'm not saying there isn't one, I'm suggesting that this only makes sense if there is one.

With that said, it may well be a neutral move... if they're not making money from the hardware today, it doesn't hurt them to not make money from the hardware tomorrow. If they extend the reach of Android, that alone may benefit Google. Actually selling unbundled would also eliminate the need for any revenue sharing with the network owners (the whole "less than free" concept). Thing is, as speced, this phone only seems to work for T-Mobile and in Europe... so is this primarily designed to be an off-the-shelf unbundled phone for Europe, not so much a US thing? At anywhere near the suggested pricing, THAT could spark a revolution in the way phones are sold in Europe. I don't see it doing that much here.

 

[hazydave]

And Apple doesn't buy in bulk considering most of the parts between the 3G and 3GS are the same? Also the more you build of something the more price goes down over time. But when you first start out manufacturing costs are the highest. Also the Iphone may cost $175 to make. But how much does an unlocked on cost?

Another way to view this... an iPhone is basically an iPod Touch with a little extra gear. Accepting the breakdown pricing from the iSuppli article (which I'm betting is rather high, given Apple's insane volumes... when you're negotiating for 20-30 million parts per year, you get prices you don't find in any volume pricing catalog), you need the cellular baseband, a few other RF components, and the camera... that's pretty much it. That's about $25 in parts. So, make this $50-$75 retail over an iPod at the same memory size, and they could make exactly the same profit as they do with the iPod. Add $50 to the price of a Zune HD, give or take, and that's about what Google could do, profitably, if they don't insist on the "Apple Tax" (the fact that Apple's able to consistently get more markup than their competitors, on MP3 players and computers too).

ZuneHD sells, on the street, at $200 with 16GB memory. If they're including a 4GB microSD card as standard (as it was with the "dogfood" units), you can cut out $50 at retail for that 16GB, replace it with $5-$7 for a 4GB microSD card, and yeah... you could see it profitable at $200-$225, give or take (the larger OLED display probably adds something over the Zune, but the Zune's nVidia chipset is probably a bit more expensive than the Nexus One's QualComm chipset).

Google has a few options for Nexus. They can A) sell it unlocked at around $400-500 (since the Eris is $375 on ebay $400 may be too low), B) They can subsidize the phone somehow (most likely Tmobile contract or fantastic number of ads on the phone) or C) being like the console makers and sell it at a loss in the hope of gaining market shares.

If they really want to do things differently, they could sell unbundled at $200-$250, and be totally in-line with regular CE pricing, and just as profitable on the electronics as other CE companies. Cell phone pricing in the USA is totally bogus, largely due to the fact that everyone's getting subsidized phones. Those cheap "free" phones you get have a parts cost of about $25-$35 these days, yet their list price is usually around $199... which is what you pay unbundled. There is no other segment of consumer electronics that has such crazy pricing.

Of course, they are splitting regular ad revenue with the carriers, now, on all Android phones. If they sold this at no profit, they'd still make more money than when you buy one subsidized though a carrier. I'm not sure of any motivation to subsidize it... doesn't seem necessary. It's a pretty good deal even sold unlocked at a profit, if they just take a normal profit on it.

 

[xanthias]

The problem I have with the claim is Google's incentive. Their move into smart phones was clear - they needed to prevent control of the smart phone market (and thus, smart-phone driven web search) by any company, such as Apple or Microsoft, who might be able to lock down the browser and/or search engine default (which is certainly the case on the iPhone... Apple won't let you use any other web browser). This is clear. But they did this, Android is now, after a year, the fastest growing smart phone platform, with support from every major cell phone maker except Apple, Palm, and RIM (even Nokia is using it on a tablet... Nokia's already supporting two smart phone OSs, neither of which has been successful in the USA, so it's quite possible they'll support Android at some point).

This is most cogent effort I've read yet to explain why Google would make such an effort, strategically. As a non-engineer, plain-old-dummy-consumer, I've been wondering from day one of the rumors what Google's strategic vision is with this foray into a very crowded market space? Google has evolved considerably in its ten years but its core mission is the accumulation of information, aggregating it, applying metrics to it and monetizing that information through algorithm-driven advertising. So, how does the "Nexus" further that mission or revenue model?

Android makes sense in this context - it's a refined packaging of the old Linux open-source war with Microsoft's and now, Apple's, closed platforms. It's device independent.

But going into the hardware/device business is not a move that one would expect, roughly analagous to Google giving away PC's under cost in order to compete with Bing. That said, I suppose you could argue it's a variation on the old Gillette razor model - give away the razors, make money on the blades. Here, translated to give away the devices (relatively speaking) to acquire the portable device market share, then monetize all those new eyeballs.... ?

The question about Google is: where is their advantage? They entered the phone market with the clear need to ensure that mobile search and other web services -- their main source of income -- did not get dominated by some other company. You can imagine Microsoft locking in default search to Bing on the Windows Mobile platform, and others might start their own services, or make a strategic deal (as RIM just did, pushing out an update that, well, locked their default search to Microsoft's Bing). As folks transition from the desktop to the handheld increasingly for search, Google needed to at the least keep others from controlling it (they haven't really needed to lock it in... people tend to use Google simply because it's better).

But they get this with every company using Android on their phones. So what's the big advantage to OEMing their own branded phone? Without some significant advantage, they certainly still could sell it cheap, even at a loss. But where's the motivation? I'm not saying there isn't one, I'm suggesting that this only makes sense if there is one.

Yep, Dave - I'm with you here, too: what does the hardware platform have to do with search? Android is testimony to why that's not a necessary move to compete in search. For that matter, why wouldn't you approach Apple to ally against Microsoft, if that's the goal? They share board members (up until recently) for pete's sake (Google CEO Eric Scmidt on Apple's board and Genentech's Art Levinson on both. Of course, Al Gore is a "Senior Advisor" at Google and also an Apple board member, so who knows how much you can read into that club membership...). So, I'm still not seeing the business case for it.

Buried somewhere in the 10k filings might be an answer. Google's not very accustomed to answering to stock holders.