Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is dead set on growing its hardware business. Not only did the company recently acquire HTC's smartphone engineering team in a $1.1 billion deal, the search giant is also reintegrating Nest back into Google in order to accelerate its smart-home product road map. And the Pixel 2 that was released last year was a strong follow-up to the original Pixel released in 2016.
Google does not directly disclose unit volumes, but IDC Research Director Francisco Jeronimo estimates that the company shipped 3.9 million units in 2017.
3.9 million and counting
That total is twice as many units as Google shipped in 2016, but keep in mind that the first-generation Pixel was launched in late 2016, so it was only available for a few months that year. For that reason, comparing 2017 to 2016 isn't all that meaningful. That being said, shipping 3.9 million units (including first-generation and second-generation models) is still a solid accomplishment for Google. Even though Google's market share of the global smartphone market is a rounding error, the trend is still encouraging and Google is clearly just getting started.
The total is also much better than the 88,000 units that Jeronimo estimates that Essential shipped in its first six months. The Essential PH-1 was a highly anticipated new flagship smartphone from the creator of Android, Andy Rubin. Essential had raised $300 million in funding last August at a $1.2 billion valuation -- before PH-1 actually shipped.
The first-generation Pixel starts at $549 after getting a price reduction following the launch of Pixel 2, and Pixel 2 XL tops out at $949. After taking into account volume and wholesale discounts to channel partners and acknowledging the fact that Pixel 2 XL simply isn't competitive at that premium price point (Apple's iPhone X is just $50 more), a hypothetical average selling price (ASP) of approximately $600 sounds reasonable, which would translate into about $2.3 billion in Pixel revenue last year.
In late 2016, Morgan Stanley had been modeling for Pixel to bring in $3.8 billion in revenue in 2017 after shipping 5 million to 6 million units.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of AAPL. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and AAPL. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.