What Will Amazon Do After Google's Big Unveil?

Next Wednesday, Google (NASDAQ: GOOGL  ) is hosting a get-together with the tech press, led by Android and Chrome head Sundar Pichai. That's less than a week away, and there's very little doubt as to what the search giant likely has in store.

The timing is just too perfect for it to be anything else. Chances are quite high that Google will unveil the newest version of Android, 4.3, while launching a second-generation Nexus 7 tablet. There's plenty of other evidence to corroborate this theory.

First off, an early build of Android 4.3 has leaked after a Google employee sold a Nexus 4 on Craigslist that was running the newest version. That's almost worse than losing a prototype in a bar, since this transaction was entirely voluntary. Android 4.3 is clearly just about ready for prime time; Google just has to officially take the wraps off.

It's now been almost exactly a year since the first Nexus 7 launched. Rivals have been cutting prices, yet Google has stood pat with its $199 tablet in the Google Play store. That hasn't stopped third-party retailers from discounting the aging tablet, though, to clear out inventory.

Speaking of third-party retailers, some leaked internal documents from OfficeMax point to a retail launch next week for the second-generation Nexus 7. At a time when rivals are cutting prices, Google seems to be going the other way, with the new model expected to price at $229 for an entry-level 16-GB model, and $269 for a 32-GB model.

This possible price increase has notable competitive implications. A tablet's most-expensive component is always the display and touchscreen assembly, usually around 40% of the total bill of materials, or BOM. Google and its primary 7-inch rival Amazon.com (NASDAQ: AMZN  ) are both expected to move to similarly high resolutions this year with their flagship tablets.

Any increase in Google's cost structure (via ASUS) related to the display will also likely play out at Amazon. In fact, early estimates of the Kindle Fire HD BOM were actually slightly higher than the Nexus 7. If Google has to raise prices due to pricier components, Amazon will face the decision of whether or not it does likewise. The e-tailer's favorite strategy is to undercut rivals to become a loss leader, and it could have an edge with its own upgraded models later this year if it absorbs any increase and sticks with $199.

Right now, the ball is in Google's court. After next week, Big G will pass it back to Amazon.

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