Add to del.icio.us     Digg this

July 20, 2010

Yesterday Google announced publicly that it is completely abandoning its Nexus One smartphone project and has no further intentions to continue selling it in the U.S. The news came as a schock to some wireless industry observers.

But Google will still continue to sell the phone in Europe and Asia it said.

The Nexus One is a touchscreen device that carry Google's brand and is powered by the Android operating system. In May, Google said it would close its Web store that sells the mobile handset once supplies were exhausted.

The Nexus One's lack of success in the market is in bold contrast with other smartphones running Google's Android software. Demand for Motorola's new Droid X has outstripped inventory in Verizon Wireless stores. The phone, which went on sale last week, is backordered to July 27, and new orders keep coming in faster than Motorola can sell them, according to the company.

Executives at major wireless carriers, including Verizon Chief Executive Lowell McAdam, say the Nexus One didn't sell well. Verizon Wireless considered carrying the phone, but backed out in late April after poor results with T-Mobile USA, Google's original service provider for the Nexus One.

"The overall reception Google had with the T-Mobile offer wasn't what they thought it would be," Mr. McAdam said in an interview in early May.

However, Andy Rubin, a Google vice president in charge of Android, didn't agree one bit with that statement.

Rubin argued that as of March, Google has sold well beyond 100,000 Nexus One smartphones in three months, the number at which Google broke even on its investment.

Rubin then went on to say that Google was already in discussions with Verizon and Sprint to carry the phone on their networks but the plans were cancelled when Google changed course.

Released in January, Nexus One was seen as an experiment by Google to sell phones directly to consumers over the Internet, with or without a mobile contract.

It failed amid what some industry executives said were poor sales, as well as complaints about Google's wireless customer service.

The strong and overall adoption of the Android operating system in the wireless industry helps ensure that Google's Web search, maps and other online services will be a mainstay on mobile devices. Google licenses its software for free to handset makers, but it is still unclear at this time when the adoption will start bringing in significant revenue.

Google says the use of its search engine on Android devices increased by almost 305 percent during the first half of the year. Sales of the Nexus One were negatively impacted by Google's insistence on selling it only through its website, said Jason Mackenzie, vice president of North America at HTC Corp., which manufacturers the Nexus One.

Other phones powered by the Android operating system, including HTC Corp.'s Droid Incredible, were on their way to market and rivaled the Nexus One's capabilities, Rubin added.

He also agreed with Mackenzie that Google couldn't find a way to effectively sell the phone online on a global scale and that its resources would be wasted in a field that Google basically has almost no experience in.

Nevertheless, Google's Android mobile OS is increasing in popularity in 2010. As of May 31, the operating system accounted for almost 13.2 percent of U.S. smartphones, compared with less than 9.1 percent in February and less than 24.5 percent for Apple, according to comScore.

But the Nexus One still will be sold through wireless retailers in Europe, South Korea and possibly elsewhere, Google said yesterday.

Vodafone Group will continue selling the Nexus One in its stores throughout Europe, including the U.K., Germany, Spain and Italy, a Vodafone spokesman said.

Wireless industry executives said users didn't know who at Google was responsible for customer service for the phone.

When the phone went on sale, Google at first only provided customer service over email, before adding phone service and adding customer support from HTC and T-Mobile USA, a decision that some say contributed to the phone's eventual demise.

The search giant said it wanted to get mobile devices with more advanced features into the market faster and lower the costs of high-end phones over time.

Rubin said that "Online sales of mobile phones will change the business just the way Internet online stores revolutionized how you buy stuff like a personal computer or other electronic equipment."

Rubin added that "Google proved online mobile phone sales worked but there are more interesting things we could do and some of these things haven't been announced yet."

Meanwhile, it will be interesting to see in the next few months how the company manages to sell the Nexus One in Europe, South Korea and possibly Japan.

Add to del.icio.us     Digg this

Source: Google.