The ongoing battle between the Google mobile operating system for cell phones and Apple’s IPhone was accelerated last week with the release of the Nexus One, a smart phone that is actually branded as a Google device.
There has been lots of speculation as to why Google was interested in getting into the hardware business, as they are primarily a search engine driven advertising company.
This article in Forbes makes it clear why Google has such a keen interest in this market. The profit potential is amazing.
The Nexus One is sold directly from Google (web sales only) and can be purchased in one of two ways. You can purchase a subsidized phone along with a two year contract for service from T-Mobile. The price of the phone is $179.00.
Or, you can purchase the phone outright-unlocked (no service contract) for $529.00 and make a deal with your own choice of service providers.
Forbes estimates that the actual cost of manufacturing the phone is $174.15. That means that Google’s gross profit on every phone is $354.85, a whopping $204% markup.
If Google is successful in getting a phone to market that people will buy without a contract, then it might force cell carriers to open up their market and be more competitive when it comes to pricing.
Google’s decision to price the Nexus One at such a ridiculously high price means that this probably won’t happen any time soon.
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