Google Inc took the wraps off the first of its smartphones on Tuesday, a device with speech recognition that it hopes can take on Apple's iPhone over time and help shore up the company's dominance in Internet advertising.
Analysts say the phone -- to be sold directly to consumers -- is not expected to dramatically alter the carrier-hardware vendor relationship the industry relies on, nor is it likely to yield a revenue windfall in the short term, though executives said it could be profitable.
Google plans to use what it calls a superphone -- the first of many types of smartphones that it will make -- to expand its reach from the PC to the mobile world and ensure its online products and ads get prominent placement on a new breed of wireless Internet devices.
The highly anticipated Nexus One, which marks the first time the 11-year-old Internet search titan has designed and sold its own consumer hardware device, could provide Google with a viable challenge to the iPhone and Research in Motion's BlackBerry.
It wasn't the game-changer people thought it could be, Canaccord Adams analyst Jeff Rath said. Google could have shaken up the industry by offering the device for free, but instead chose more traditional pricing, he said.
Rath added that though his early impression was that the Nexus One was a good phone, it was unclear how much better it was than Motorola's Droid, released last year and that also runs on Google's Android operating system platform.
It's very close to the Droid, some people will debate whether it's better. But it looks like an incremental improvement rather than a blow-the-doors-off improvement, Rath said.
The Nexus One, which was garnering favorable first reviews on tech Websites and forums on Tuesday, ships immediately from Google's online store for $179 with a two-year contract from Deutsche Telekom's T-Mobile USA, or $529 without a service plan.
Executives said the phone will be carried on Verizon Wireless's network in the United States, and eventually on Vodafone's in Europe. Verizon Wireless is a joint venture of Vodafone and Verizon Communications.
WAIT AND SEE
Investors are taking a wait-and-see view on Google's first effort to sell a hardware product directly to consumers.
Google's stock has risen about 7 percent since the start of December, setting a 52-week high of $629.51 on Monday. But analysts say that was driven by improvements in its core business of Internet search advertising, rather than the prospect of tapping a new pool of revenue selling smartphones.
Its shares closed 0.44 percent down at $623.99.
The Nexus One phone comes a little more than two years after Google jumped into the mobile market with the announcement it was developing a free smartphone operating system. Google's Android software is currently available on more than 20 phones from vendors including Motorola and Samsung Electronics.
It pits Google -- the world's No. 1 Internet search engine, with annual revenue of about $22 billion in 2008 -- against a variety of more experienced players in the increasingly crowded smartphone market, including Palm Inc and Nokia.
Some analysts were positive on Google's effort to continue to establish the Android as a popular operating system for smartphones and wireless devices.
It will help them keep consistency for Android platform, said Jim McGregor, Chief Technology Strategist for In-Stat.
The new phone helps Google get their partners all on developing a single platform that applications can be developed on.
Motorola, which is banking on the Android system to power a new generation of smartphones to revitalize a flagging business, said on Tuesday it welcomed the competition. Co-Chief Executive Sanjay Jha told Google's audience he did not see the Nexus One as a threat, but as an expansion of the market.
Google worked closely with HTC to develop its phone, which uses a 1 gigahertz Snapdragon processor from Qualcomm Inc. The Nexus One is 11.5 millimeters thick and weighs 130 grams -- which executives said was lighter than a Swiss Army knife and no thicker than a No. 2 pencil.
The phone will feature a 3.7-inch (9.4 centimeter) touchscreen display. It will run the 2.1 version of the Android operating system and feature OLED display technology, a trackball for user interface control, an accelerometer chip, and a 5 megapixel camera.
(Writing by Gabriel Madway; Editing by Edwin Chan, Phil Berlowitz)