Carrier apathy depresses Nexus One outlook

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Carrier apathy depresses Nexus One outlook

Google discovers the dangers of challenging the major cellcos as Goldman Sachs slashes handset sales forecasts by 70%

By CAROLINE GABRIEL

Published: 11 March, 2010

READ MORE: Google | Handset | Android

Google is discovering just how dangerous it is to ruffle the feathers of the major cellcos. Its Nexus One handset may be one of the most advanced on the market, and bear the magical brand, but halfhearted marketing efforts by carriers have led to disappointing sales. Now, analysts at Goldman Sachs have slashed their estimates for sales of the phone this year by 70%.

Several operators did lend support to the Nexus launch, despite Google's introduction of a direct-to-consumer sales approach, but there was always a sense that their backing was grudging - and largely based on a fear of losing out, should the phone prove as wildly popular as some analysts predicted.

Their main qualms would have surrounded the route to market. Google offered the device, with a selection of carrier deals, from its own specially created web store. In some ways this was no different to an Amazon approach, but it was widely seen as the thin end of the wedge, in Google's avowed bid to relegate the operators to bitpipe roles and put its own brand center stage. Cellcos will have heaved a sigh of relief that uptake of the Nexus was disappointing in the early stages, and that other handsets with similar capabilities quickly came along - notably the Desire from HTC, which also makes Nexus. Both these options offer Android 2.1, gigahertz Snapdragon processors and other attractions, though the Desire has been more acclaimed for its user experience.

In the hype surrounding the launch of Google's first own-branded handset, some pundits predicted that it would sell 3.5m units in its first year. Now Goldman Sachs has cut its forecasts, and wrote in a research note, quoted in ZDnet: "We previously estimated that Google might sell 3.5m Nexus One units in 2010. "Initial data points were disappointing, possibly due to limited marketing and customer service challenges. Flurry estimated (based on mobile traffic) that Google sold 20,000 in the first week, and 80,000 in the first month, both annualizing to 1m. We forecast that Google sells 1m Nexus One units in FY2010, benefiting from US carriers other than T-Mobile, and non-US carriers such as Vodafone, promoting the device too, but suffering from limited marketing activity."

Vodafone is the only international carrier that has committed firmly to Nexus One, though it shows no signs of putting the phone high on its list of marketing priorities, with much of its effort being placed behind other HTC models, the iPhone and its own 360 models.

Undeterred, Google is still expected to announce new Nexus models and widen the distribution of the original. This year should see a more enterprise focused 'Nexus Two', probably made by Motorola, and a cutdown version of the first phone is reported to be launching in India and Russia in the fourth quarter. This would sacrifice some features, including the top end processor, in order to keep the price down around the INR24,000 (about $500 unsubsidized).