While impressive in many ways, the Google Inc. (Nasdaq: GOOG) Nexus 7 tablet unveiled today (Wednesday) will struggle in a market already teeming with offerings from other tech titans.
Key competitors include tablet market leader Apple Inc. (Nasdaq: AAPL), Samsung Electronics Co. (PINK: SSNLF), Amazon.com (Nasdaq: AMZN) and as of last week, Microsoft Corp. (Nasdaq: MSFT).
The 7-inch Nexus 7 certainly has a lot going for it, primarily its 1,280 x 800 pixel high-definition screen, a powerful quad-core NVIDIA Corp. (Nasdaq: NVDA) Tegra 3 processor and a reasonable $199 price tag. It will run a new upgrade to Android called Jelly Bean.
Apparently the Google tablet, actually built by Asustek Computer (PINK: AKCPF) and co-branded with Google, is intended to re-energize a moribund Android tablet market that has failed to dent the dominance of the iPad.
"The tablet market is a major challenge for Google at this point," Clayton Moran, an analyst at Benchmark Co. told Bloomberg News. "They need to have a competitive product with the iPad."
Another goal for the Nexus 7 is to show other Android tablet makers how Google thinks it should be done. Analysts suspected similar reasoning behind the Microsoft Surface tablet unveiled last week.
Finally, Google said it wanted to use the tablet to push users toward its services like YouTube and promote sales of its apps through its Google Play store. With the Nexus 7 priced so low, Google will need to sell such extras to make any money.
It's ambitious, but a flop could end up doing more harm than good to the Android platform.
The central problem for the Nexus 7 is not that it's a poor product, but that it doesn't have an obvious niche in today's crowded tablet market. The Google tablet faces established competition from top to bottom - and especially at the bottom.
Here's the breakdown:
That tablet would be The Amazon Kindle Fire. Looking at the Kindle Fire, it's clear that this is really the product Google had in its crosshairs. Like the Nexus 7, the Fire is a color, 7-inch tablet. It runs an Amazon-modified version of Android and starts at $199.
And like the Nexus 7, the Fire is priced too low for Amazon to make much (if any) profit on the hardware. But the Kindle Fire is a loss leader intended to spur sales of Amazon goods, especially digital content like music, books and movies.
When the Fire sold like hotcakes during the 2011 holiday season, Google surely noticed.
"Google has to be more than a little frustrated that the first mainstream hit Android tablet is the Kindle Fire," Tom Mainelli, an analyst at IDC, told Computerworld.
Google now appears to be trying to mimic Amazon's model with the Nexus 7, but it faces several obstacles.
For one thing, Amazon is expected to release a Kindle Fire 2 at the end of July. The word from DigiTimes, a Taiwan newspaper that covers the electronics industry, is that the Kindle Fire 2 will have a 1,280 by 800 pixel high-definition screen and a front-facing camera, putting it on par with at least some of the Nexus 7 features.
But the Kindle Fire 2 may pack a weapon potentially more lethal to Google's tablet - a much lower price. The new Kindle Fire may sell for just $149.
The new Fire will look mighty appealing to price-conscious shoppers at the lower end of the tablet market. That could mean a lot of Nexus 7 models collecting dust on store shelves this holiday season.
Finally, as a loss leader the Nexus 7 is unlikely to make anywhere near what the Kindle Fire does. Amazon has a major edge when it comes to digital content.
"If Google is looking to take a bite out of Amazon's share, it will find that it's competing against a much more well-developed entertainment orientated platform with huge, well-organized catalogues of books and media content," Salman Chaudhry, an analyst at research company Context, told The Guardian.
Google (Nasdaq: GOOG) fell 0.88% Wednesday to $564.31.
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