Google conceivably could offer a sharp discount on the Nexus One without carriers’ help, hoping to recoup some of the costs by selling more ads on the devices. But the mobile advertising market is unlikely to grow quickly enough to offset the costs of the discounts for several years, so pursuing that strategy likely would crimp Google’s profits –something that could drive down the company’s stock price.
Another option is for Google to sell the phone at the full price, banking that it’ll be attractive enough for buyers looking for the freedom to choose their own carrier.
A smart phone that empowers consumers to choose from a variety of carriers could post a threat to the iPhone, which is tied exclusively to AT&T in the United States. That tie-in has spurred complaints from some iPhone users who say AT&T’s network bogs down amid heavy web traffic, particularly in big cities such as New York and San Francisco.
With the competition between the two companies heating up, Google Chief Executive Eric Schmidt resigned from Apple’s board five months ago.
Selling its own phone also could foster more resentment toward Google among the business partners that have been backing Android as a viable alternative to the mobile operating systems made by Apple, BlackBerry manufacturer Research in Motion Ltd., and Microsoft Corp.
Verizon, for instance, has raised consumer awareness about Android during the past two months by bankrolling a marketing blitz for the Droid phone made by Motorola Inc.
In an effort to keep the peace, Google probably will try to position the Nexus One as a way to encourage even more innovation with its Android system, said Forrester Research analyst Charles Golvin.
“They might tell everyone in the Android ecosystem, ‘We applaud you for what you have done so far, we just want to take things even further–and think we can help light the way,'” Golvin said.
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