Nexus One (Google's Smartphone)

[optionpundit]

09:15     GOOG Google Nexus One carries $174.15 materials cost, says iSuppli - DigiTimes  (602.02 )

DigiTimes reports the Nexus One, sold with the Google brand name but manufactured by HTC, carries a bill of materials of $174.15, based on a preliminary estimate from iSuppli. This total comprises only hardware and component costs for the Nexus One itself and does not take into consideration other expenses such as manufacturing, software, box contents, accessories and royalties..."With the Nexus One, Google has taken the most advanced features seen in recent smartphone designs and wrapped them up into a single sleek design," said Kevin Keller, senior analyst, competitive analysis, for iSuppli. "Items like the durable unibody construction, the blazingly fast Snapdragon baseband processor and the bright and sharp AMOLED display all have been seen in previous phones, but never before combined into a single design. This gives the Nexus One the most advanced features of any smartphone ever dissected by iSuppli -- a remarkable feat given the product's BOM is similar to comparable products introduced during the past year."

What do you think? Can google challenge apple now? what do you think google's margin will on this product? 15%? very rough cut analysis...Priced at $579 that translates to almost $90/phone profit (without contract);in 2008 iPhone sold over $13millions, 10% of that is 1.3millions sets X100= $130millions additions; even in the worst case, a few % of growth to the bottomline...what do you think from usage point, will you make a switch? or when will you make a switch?

[prakashsi]

too early to switch, i have seen the nexus one, friend works at google. it is amazing but what is the point to switch from iphone? not yet that amazing. same with droid. i think the tablets this year will be the big splurge spend for most.

[everestp]

Google is not in this purely for the profit on the phone, as the margins don't compare favorably to their core business (making money off of organizing information). I don't know for sure, but I'd bet their margins on advertising are > %35 and probably much higher. Selling phones is a nice business, but they won't keep their stock price high by averaging down their margin. I think it's more of a strategic play to expand the search market (every owner of a Nexus is a guaranteed user of google.com and a revenue stream) and to challenge the carriers (Verizon, AT&T, etc), Apple, Microsoft, and anyone else who might have a control point that could stop people from using google as their search engine.

In the end, Google wants every person in the world to walk around with a smart phone that has access to the web using www.google.com as the home page. More people with constant access to www.google.com = more hits = more revenue at high margin.