After experimenting with the online hardware sales model by bypassing carriers completely for the Nexus One in 2010 and burning its hands, Google (NASDAQ:GOOG) decided to focus on the Android software while leaving hardware sales to its device partners like Samsung, Motorola (NYSE:MMI), HTC and its carrier partners like Verizon (NYSE:VZ), T-Mobile and AT&T (NYSE:T). However, it seems to be trying its hand at selling the Galaxy Nexus, its latest flagship Android device through direct online channels again. 
This week, it made the Galaxy Nexus HSPA+ available online on its new Play Web Store for $399, contract-free. There are primarily two main issues with this approach – 1) most phones in the U.S. are sold by carriers instead of device manufacturers which puts Google at odds with carriers, and 2) the difficulty of providing proper support without a physical channel.
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We’ve yet to see how Google plans to navigate around these obstacles this time around. Google is also offering $10 in free Google Wallet credits to get users to start using its service on the Galaxy Nexus.
This could just be a demo run to work out the kinks in the online retail model before Google launches an online tablet store for its rumored Nexus Tablet. The timing also coincides with the roll out of Google Drive which offers cloud based memory that could help solve the issue of expensive memory chips in tablet devices.
In any case, we don’t expect this new move to impact Google’s value significantly as Google’s phone hardware business accounts for less than 2% of its $680 Trefis value estimate.Notes: