Despite all of Samsung's recent attempts to undermine Google (NASDAQ: GOOG ) in its newest Galaxy S4, primarily by replicating and marketing its own software and services over Google's, the South Korean giant is now tossing the search juggernaut a bone.
Google had its hands full yesterday on the first day of its I/O developer conference in San Francisco, announcing a wide swath of new offerings. Perhaps one of the most surprising developments was that Google and Samsung would soon begin offering a version of the Galaxy S4 running stock Android 4.2 Jelly Bean, ditching Samsung's TouchWiz interface and software modifications.
It's not branded a Nexus device, but that's effectively what this is. Google noted it would offer a "Nexus user experience." The model will sell at the unsubsidized price of $649 directly through Google Play, and be an unlocked GSM model with LTE support.
Make no mistake: this move isn't about Samsung growing unit sales. This is a gesture of good faith intended to smooth over any kinks in Samsung's relationship with Google.
A peace offering
Google's Nexus program is an ambitious attempt to remove carrier middlemen and sell directly to consumers. That also entails removing carrier subsidies. We already know that the subset of smartphone buyers willing to pay full retail price for devices is extremely small. That's partly why Google's current flagship Nexus 4 sells for $299. One of the Nexus 4's biggest drawbacks is the lack of LTE support, which was necessitated by Google's broad international strategy for the singular model as well as cost and engineering considerations.
Samsung is already making a GSM model that's compatible with LTE networks in the U.S., so it takes very little effort to make one with stock Android. Since the stock GS4 is being sold through Google Play, presumably it will also receive software updates directly from Google, as opposed to most Androids, whose updates are bottlenecked by carriers and OEMs.
It should also be clear that Samsung isn't hurting for unit sales at this juncture. The company is currently the No. 1 smartphone vendor in the world, shipping an estimated 70.7 million units in the first quarter. In fact, I'd wager that Samsung specifically doesn't want this stock GS4 to sell well, because its success would only contribute to Samsung's commoditization. The last thing that Samsung wants is for people to express massive interest in only its hardware at a time when it wants consumers to buy into its software and services.
Google and Samsung have collaborated on Nexus devices in the past. In fact, Samsung built two of the four Nexus smartphones that Google has launched over the years, the Nexus S and Galaxy Nexus. HTC built the original Nexus One and LG makes the current Nexus 4.
Some people will purchase the stock GS4, but it will hardly be a mainstream device and Samsung certainly prefers it that way.
As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.