Google in Phone Search?
Citing "a source close to the talks," U.K. broadsheet the Observer reported over the weekend that Google (Nasdaq: GOOG) is discussing a mobile phone deal with European carrier Orange SA (London/Paris: OGE). The paper claims that executives from Orange flew to Google's Mountain View headquarters for "preliminary discussions" about a joint handset venture.
Taiwanese handset manufacturer High Tech Computer Corp. (HTC) (Taiwan: 2498) is seen as the logical original-equipment manufacturer for any future Google phone.
Google has not commented, but Orange (NYSE: FTE), the owner of Orange, was quick to deny the rumor. FT CEO Didier Lombard told French newspaper Les Echos that his company had not held talks with Google, while a spokesperson called the Observer article "utter speculation."
The Googlephone speculation emerged the day before Cisco Systems Inc. (Nasdaq: CSCO) division Linksys released a line of cordless VOIP phones under the model name "iPhone" -- thus preempting the release of iPhones from Apple, which has long been presumed to be developing its own mobile phone.
Branded phones are often seen as a way to offer consumers richer and more targeted experiences than conventional carrier-distributed models while tapping into the huge and still-growing market for mobile phones. World handset shipments are expected to hit one billion this year, according to IDC , as developing-world consumers acquire mobile phones and customers in "saturated" markets in the West and in East Asia buy replacement phones with added features.
A Google phone would make sense, according to Avi Greengart, principal analyst for mobile devices at Current Analysis , as the search giant tries to push its capabilities -- and its ad sales -- into new realms.
"Even leaving aside the potential mobile advertising market, there is a natural progression from tethered (PC-based) Web services to mobile (phone-based)," Greengart explains. "Yahoo already has a suite of mobile applications, and Google has been doing a lot of one-offs for specific handset models."
For example, Google agreed to provide clips from YouTube, acquired by Google in October for $1.65 billion, to Verizon Wireless subscribers last month. In another Internet-app-to-mobile deal, Cingular said today it would provide subscribers who pay $3 a month access to MySpace content on their mobiles. (See The Gorilla That Ate the Carriers.)
Such one-off deals do not satisfy Google's desire for ubiquity, however.
"It is hard to gain traction in such a fragmented wireless market," points out Greengart. "The ubiquity and homogeneity of the Windows/Internet browser platform is a key reason for Google's success."
Whether it chooses to plunge into the risky, low-margin business of selling mobile phones or not, Google is clearly plotting ways to grab a large chunk of mobile ad dollars. The market for mobile advertising is expected to hit $1.26 billion in 2009, up from just $45 million in 2005, according to Ovum Ltd.
Google spokespersons declined to comment on the Googlephone rumors.
— Richard Martin, Senior Editor, Unstrung