News

Google's Nexus One Looks To Reshape Smartphone Market

• By Jeffrey Schwartz
• January 06, 2010

As expected, Google on Tuesday launched the Nexus One, a touch-based smartphone that boasts many of the features of Apple's iPhone as well as some new features, including support for native voice response within applications.

The Nexus One is manufactured by Taiwan-based HTC and is completely touch-based, without a keyboard. But what makes Nexus One stand out is that users can buy the Google-branded phone directly from the company's new online store. Customers can choose from a variety of carriers (initially T-Mobile and Verizon) or even put in a supported SIM card from another phone. This is a major departure from the current model, which requires customers to acquire a phone through a carrier.

Some analysts believe the direct model Google is offering could weaken the hold carriers have over customers. According to In-Stat analyst Allen Nogee, carriers are likely to be irritated because not only is Google competing with them, but the company has added enhancements to its Android operating system before making them available to other OEM partners.

"It changes the marketplace when you're competing against the same partners you are working with," Nogee said.

Nevertheless, if Android does make inroads, not only will it represent a threat to Apple's strong developer ecosystem, but analysts say it could further erode support for Microsoft's Windows Mobile platform, whose share continues to decline.

"It hits Microsoft by essentially killing any chances for Windows Mobile, since consumers would be unlikely to buy a Windows Mobile phone directly," said Tom Nolle, an analyst at CIMI Corp.

Indeed, many of Microsoft's partners, while not abandoning Windows Mobile, are looking to broaden the number of mobile platforms they support.

When Google first disclosed plans for Android, analysts were skeptical it would make a dent in the market. However, there are now 20 Android-based phones, including the popular Droid released by Motorola last month. A survey of more than 4,000 consumers in December by market researcher ChangeWave revealed that 4 percent of smartphone owners have one running Android, up from just 1 percent in September. But according to a study released Monday, a startling 21 percent of those who intend to buy a new smartphone within the next three months are leaning toward an Android-based device. That's up from just 6 percent since September. 

By comparison, only 6 percent are considering Windows Mobile phones, down from 9 percent in September.

"All Microsoft can do right now is to look internally and get its own house in order," said Giovanni Gallucci, organizer of the Windows Mobile Developer Camp.

But while many analysts are skeptical of Microsoft's prospects for gaining substantial share with Windows Mobile, some say it's too early to count the company out.

"I continue to get a wink, wink, nudge, nudge from sources internally at Microsoft about a phone on the Zune platform," Gallucci said. "Microsoft is big enough to buy some time if they just announce something that is new and exciting. Many companies would have already folded, but Microsoft has the luxury to underperform in the mobile space with their war chest."

Google's latest effort could change the stakes for Microsoft, according to In-Stat's Nogee. "Google has breached that middle ground by making its own phone," he said. And while it remains to be seen whether Microsoft will follow suit, the Nexus One may give Microsoft a stronger hand with OEMs. "I wouldn't write Microsoft off yet," he said.