Nexus One and Done

If you've been holding your breath waiting for Google (Nasdaq: GOOG  ) to follow up the Nexus One phone, it's time to take in some oxygen. Nexus Two ain't happening, folks -- it's "One and done" this time. Google gave up on the Nexus line of phones after the first try, and the Nexus Two will never happen.

The revolution that never started
The original purpose of commissioning the Nexus One from HTC was to test out a new sales model for the mobile phone industry. Instead of letting Deutsche Telekom division T-Mobile sell the phone in its stores, Google insisted on channeling all sales through a Google-owned website.

T-Mobile was the first in a supposed line of service partners; Verizon (NYSE: VZ  ) and Sprint Nextel (NYSE: S  ) signed up but then dropped out again when the more powerful EVO 4G and Droid Incredible arrived on their networks. The idea was to have consumers select a phone first and a network second instead of the other way around. Nexus One would be followed by other models, probably by other manufacturers including Samsung and Motorola (NYSE: MOT  ) .

But Nexus One sales never really took off, and the Nexus One site will stop selling phones. You can still slide in and pick up the phone that's compatible with either T-Mobile or AT&T (NYSE: T  ) . But T-Mobile (and perhaps other retailers) will soon take over the selling duties and leave Google's effort a mere monument to what Android phones can do.

In the eyes of Google CEO Eric Schmidt, that's not so bad. "The idea a year and a half ago was to do the Nexus One to try to move the phone platform hardware business forward," he told The Daily Telegraph. "It clearly did. It was so successful, we didn't have to do a second one." One phone call to the board of directors later, the Nexus series officially ends at One.

I don't know how Eric justifies that statement to himself. At best, I'd call the Nexus One an irrelevant footnote in mobile history. Nice phone, sure, but there were several equally powerful Android phones waiting in the wings almost from the start. Did the Nexus One project light a fire under HTC to bring high-end models like the Droid Incredible and EVO 4G to market faster? Perhaps. That would be a victory of sorts, if those models weren't chronically out of stock. Verizon even lets you cancel your Droid Incredible order in exchange for a Motorola-made Droid X without a restocking fee, which tells you something about the Incredible's incurable manufacturing issues.

The real story
Google-branded phones never did make sense to me, and now we know that Big G just wanted a playground in which to frolic until the whole Android movement got off the ground. Playtime is over, because Android phones are serious business nowadays.

The Nexus One was never a threat to the Apple (Nasdaq: AAPL  ) iPhone, but the avalanche of non-Googlish models that followed certainly is. Not to kill the iPhone, mind you, but certainly a threat to keep Steve Jobs on his toes lest some Android alternative or other might overtake his beautiful cash cow in utility, popularity, and revenue. Steve will probably always own the "Best Design" award, even if it makes the phone worse in other respects. There's a market for that, and maybe even an app.

Should we give credit to a pebble that may have started the landslide? I think the original Droid by Motorola would get that nod. Sorry, Eric; I'm not buying the "This was a triumph" line. But at least you didn't waste a whole lot of invested effort and money. Let's split the difference and call it a Pyrrhic loss.

How did the Nexus One experiment do in your eyes? I expect a heated debate to break out in the comments box below.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Sprint Nextel is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Google. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (5) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2010, at 1:44 PM, Henry3Dogg wrote:

    The Microsoft Kim has been a similar fantastic success allowing Microsoft to similarly retire from the market.

  • Report this Comment On July 06, 2010, at 2:40 PM, petehoch wrote:

    Nexus One is a total non event. Both coming and going.

  • Report this Comment On July 06, 2010, at 5:43 PM, wiseguyy wrote:

    Nice article and very good insight/reasoning. My favourite quote:

    "Steve will probably always own the "Best Design" award, even if it makes the phone worse in other respects. There's a market for that, and maybe even an app."

  • Report this Comment On July 06, 2010, at 7:34 PM, xflyzipperx wrote:

    I'll copy and paste my view ...

    One thing that the Google Nexus One did achieve was kickstarting the then moribund Android segment. It help generate more buzz than any phones before (apart from the iPhone) and it has tremendously helped partners like HTC or Motorola convince networks that Android is here to stay.

    Source ...

    http://www.itproportal.com/portal/news/article/2010/7/3/no-g...

  • Report this Comment On July 07, 2010, at 1:27 AM, MichalTod wrote:

    As far as I can tell, Google paid HTC to design the best Android phone on the market at the time; then HTC did Google one better and released better phones. As a result, I think it accelerated the Android market by months, and started the current leap-frogging Android handset makers are engaged in. Which is good for Google. I think it was a net win for them.

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