Google’s (NASDAQ:GOOG) recently launched smartphone, the Nexus One, is likely to be sold by Verizon (NYSE:VZ) in addition to T-Mobile soon. There are several factors that have led to weak Nexus One sales (only 80,000 units in the first month of launch) and prompted Google to pursue new partnerships with mobile operators like Verizon:
1. Problems with T-Mobile’s network
- T-Mobile has a smaller geographical presence compared to AT&T, Sprint and Verizon which limits the potential market for the Nexus One
- T-Mobile has had problems with its 3G network that have cast a negative light on Google’s Nexus One
2. Limited marketing initiatives and distribution
- Google has not made enough marketing efforts to promote the Nexus One
- Google’s web-based storefront remains the only medium to purchase a Nexus One
Nexus One is 9% of Trefis Estimate for Google’s stock
We believe that additional distribution through Verizon and Vodafone can help Google sell 5 million phones in 2010. Based on our forecast for Nexus One unit sales and pricing over time, we estimate that the Nexus One constitutes 9% of the $703 Trefis price estimate for Google’s stock.
Verizon and Vodafone Can Boost Nexus One Sales
The Federal Communications Commission (FCC) is expected to approve a CDMA version of the Nexus One that will clear the way for the phone to be made available on Verizon’s CDMA network.
Verizon enjoys far greater customer coverage and credibility than T-Mobile which will help Google gain more traction among mobile phone users if the Nexus One is offered through Verizon. We expect Verizon to have 32% market share (about 91 million subscribers) in the US mobile market of 287 million subscribers in 2010.
Google is also expected to launch its phone in Europe via the Vodafone network in April this year, which will further boost its market share.
Based on higher expectations from Verizon and Vodafone, we believe Google can sell an estimated 5 million phones this year, which amounts to 0.4% share within the 1.3 billion unit global mobile phone market expected in 2010.
You can modify our forecast above to see how Google’s stock would be impacted if it’s not able to reach 0.4% share in the global mobile phone market in 2010 as we forecast.
For additional analysis and forecasts, here is our complete model for Google’s stock.
