Will Google’s Multi-Partner Nexus Device Strategy Work?

May 17th, 2012 by Trefis Team
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Google (NASDAQ:GOOG) is apparently planning to change its Nexus device strategy in the coming months to expand the reach of its devices and try to wrestle control of its devices from carriers yet again. It will give five device OEMs early access to future versions of Android and sell those devices directly to consumers. [1]

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Google has tried direct sales model for its first Nexus device, but that ended in failure, especially in America where carriers dominate handset distribution. This time around, Google will partner with carriers who will utilize their own muscle to push their devices in consumers’ hands. Google has partnered with device makers like Samsung, HTC and Motorola to create flagship Nexus devices before, but this time, it plans to rope in all the top device makers.

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This could also be an attempt to appease its device partners who were apparently disappointed when it acquired Motorola. By going forward with this strategy, Google will also try to exert more control on key features and apps on Android devices, and try to fight fragmentation, which is one of the biggest problems Android users and developers face. It will also allow it to push updates to all Nexus devices, ensuring that they run the latest software.

Besides improving the Android ecosystem, Google could also generate a modest profit on the sale of each device. This would be in addition to the benefits it already derives from Android, which include higher mobile advertising revenue and greater reach of its services.

We currently account for Nexus devices in the Google Phone division in our Trefis model for Google. It accounts for 1.9% of the total $678 Google Trefis price estimate, which stands nearly 10% above the market price. However, if Google’s new Nexus strategy proves to be successful, it might become a much more valuable part of Google’s overall business.

Google competes primarily with Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) in the smartphone space.

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Notes:
  1. Google Shifts Tack on Android, WSJ [↩]