Always one to fan the speculative flames of the rumor mill, DIGITIMES never disappoints. This time the dubious publication is reporting that Google (NASDAQ:GOOGL) is looking into two new versions of its popular Nexus 7 Android tablet, but the real scoop is that one of these may be priced as low as $99.
The other would be at the current $199 price point, and the search giant is supposedly working with its existing Nexus 7 manufacturer, Asus, on the new devices. It's said they'll be released before year's end, just in time to respond to the presumed Apple (NASDAQ:AAPL) iPad Mini expected next month.
So far in the Nexus 7's relatively short life span so far, the tablet has gained respect among consumers and industry pundits alike, and a $99 offering does sound incredibly tempting. That's well within impulse-buy territory, and in the pricing neighborhood of Amazon.com's (NASDAQ:AMZN) popular Kindle e-readers. A $99 Nexus 7 would be a major tablet threat to both Amazon and Apple.
Sadly, this rumor doesn't withstand the sniff test. Not only has Asus explicitly denied the rumors, but there are several other aspects of this report that don't check out. First off, the Nexus 7 is just two months young, and most players have gravitated toward one-year upgrade cycles, so releasing a new version within six months would be rather odd.
Including manufacturing costs, the low-end Nexus 7 carries a bill-of-materials of about $160, and total component costs aren't going to fall by 38% in under six months for Google to be able to sell the device near cost. Selling the device at a significant loss with the hopes of making it up in Google Play content isn't likely, because it would need to sell an awful lot of apps, movies, magazines, and such before breaking even.
DIGITIMES says that Google would use twisted nematic, or TN, panels sourced from Taiwanese panel maker HannStar Display. That could potentially generate cost savings compared to the higher quality in-plane switching, or IPS, panels currently used in the Nexus 7. Just as an example, a 23-inch monitor from Dell using an IPS panel costs over 80% more than a comparable TN version. Still, it's a stretch to think that Google could get costs down close to $99 even if it used a TN panel.
This Nexus 7 rumor simply doesn't check out.
Evan Niu, CFA, owns shares of Apple. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Amazon.com, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.