Thursday, September 27, 2012

Google Inc (NASDAQ:GOOG) May Jump Into The Hardware Space

Internet search giant Google Inc(NASDAQ:GOOG) which has built massive brand equity with its Android operating software, could soon come out with its own phone, according to a portfolio manager at T. Rowe Price.

Since Android operating software was not generating revenues for Google and was more of a branding exercise, the company would soon jump into the hardware space, is the reasoning by Dan Martino of T.Rowe Price.

"They want to move more aggressively into handsets and tablets," Martino said recently.

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He holds the view that the acquisition of Motorola Mobility by Google was not really about the patent fight but a prelude to its entry into the hardware segment with its own Google-branded phones.

His estimate is that by the end of next year the company could be ready with a hardware product under the Motorola brand.

However the hardware segment operates on wafer-thin margins and the only way to get profits is through volumes and this is where both Samsung and Apple score over their rivals.

However a Google phone means that handset makers that run on Android such as Samsung, HTC and LG will be in direction competition with the company that is partnering them and providing their operating software.

According to Martino Google will have to diplomatic and use its skills in relationship management.

Martino envisions a less buggy phone that is more tightly tied to the nascent Android ecosystem. Google has enormous amounts of cash, meaning they don't need to make much money on hardware, just enough to stay alive.

Shares of GOOG are up 0.18% to $754.80. The stock made an all time high of $764.89 earlier this week and became fifth most valuable company.

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