Please ensure Javascript is enabled for purposes of website accessibility

2 Big Winners From Google’s Next Nexus Phone

By Jamal Carnette, CFA - Jun 21, 2015 at 12:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These two companies hope Google's next Nexus phone is a game changer.

Google's current-gen Nexus 6. Source: Google.

For Google (GOOG -2.57%) (GOOGL -2.45%) investors, the smartphone industry has been somewhat confounding. On one hand, Google's open-source Android platform is by far the largest mobile operating system by global market share, edging out Apple's iOS 78% to 18.8% in the first quarter of 2015, according to IDC data.

On the other hand, it's been hard for Google to monetize Android subscribers; Goldman Sachs found that in 2014, Google made more money from iOS users than from its own operating system.

Apple is a clear winner when comparing hardware, though. Its signature iPhone has racked up nearly 140 million unit sales in the last two fiscal quarters, adding more than $90 billion to Apple's top line in the process. Meanwhile, Google's foray into hardware has been rocky. After seemingly attempting to dive deeper into the business by buying Motorola Mobility in 2011, Google sold the line to Chinese hardware manufacturer Lenovo last year after several quarters of divisional losses.

Google still has the Nexus, a line of phones and tablets it markets and designs while farming out production to OEMs. Recent rumors have suggested that Google is preparing to bring two versions of the next Nexus phone to market, with LG manufacturing a smaller-sized unit reminiscent of the Nexus 5 and Huawei making a larger phablet-like model akin to the current-generation Nexus 6.

It appears the latter rumor at least is correct, as a Huawei employee confirmed to the International Business Times that the company is making the Nexus phone.

Big win for Huawei, maybe bigger for Qualcomm
While it might not be a household name in the United States, Huawei in the first quarter was the fourth-largest smartphone vendor in the world behind Samsung, Apple, and Lenovo, according to IDC's data. The company is better known in its home market of China and has a following in Europe with its midrange Honor line and flagship P8 model. Although the Nexus line hasn't sold too well in the U.S., the phone is considered a premium model. Plus, any affiliation with Google -- even as simply a manufacturer -- could improve Huawei's brand in the skeptical U.S. smartphone market.

Another big winner appears to be chipmaker Qualcomm (QCOM -1.91%), as early reports indicate that the Huawei-manufactured device will use Qualcomm's signature Snapdragon 810 processor.

Recently, this chip has faced additional scrutiny as concerns that it is prone to overheating -- pardon the pun -- heat up. After early reports of overheating by the Snapdragon 801-powered HTC One M9, a benchmark test found the phone can reach temperatures of 130 degrees Fahrenheit -- compared to an average of 104 degrees for comparable phones with different processors. Sony's flagship Xperia Z3, another Snapdragon 810-powered unit, has also been found to overheat, prompting the company to put a warning label on the unit.

In the end, Qualcomm's flagship chip could be OK, as it appears Google and Huawei have no problems using the silicon. In the "perception is reality" world of technology, Qualcomm needed a signature win after Samsung chose its own Exynos processors for its flagship Galaxy S6 and Galaxy S6 Edge instead of the Snapdragon 810.

Qualcomm appears to have gotten this win from Google. Will Google's next Nexus phone find a receptive audience? Who knows, but Qualcomm and Huawei certainly hope so.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,179.26 (-2.45%) $-54.77
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
QCOM
$127.74 (-1.91%) $-2.49
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,187.45 (-2.57%) $-57.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.