Google's Nexus lineup may not sell well, but still challenges Android makers

Nexus is Google's 'hedge against indifference'

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Nexus devices can be purchased online in the Google Play store unlocked or with any carrier's cellular service long-term contract. For example, the new Nexus 5 smartphone starts at $349 unlocked for 16 GB, running Android 4.4 (KitKat), but it can cost much less with a carrier contract which usually requires a two-year commitment.

The new Google Nexus 7, a 7-in. tablet, starts at $229 for a 16 GB Wi-Fi model. Made by Asus, it offers optional LTE. The Google Nexus 10, a 10-in. tablet, starts at $399 for 16GB over Wi-Fi. Both received Android 4.4 KitKat updates in mid-November.

The 16 GB version of the Nexus 10 was recently listed on Google Play as out of stock, but shoppers were urged to "check back soon."

Temporary shortages of Nexus products could lead buyers to assume the devices are very popular, although analysts said it's too hard to judge if the shortage is due to a deliberately limited inventory in the first place or robust sales. Google hasn't commented.

Even if Nexus sales aren't spectacular, Google is making a market impact in driving home its point of showing how a stripped-down Android OS can be valuable to some consumers, while also indirectly lowering costs for smaller cell-phone makers in emerging markets.

Lower costs with basic Android

Smaller manufacturers that produce white-box devices for emerging markets in Asia and other parts of the world do little to enhance Android, if they do anything at all, noted Jack Gold, an analyst at J. Gold Associates.

"These vendors are having an impact, especially at the low end, so in that sense, vanilla-flavored Android [with no or few software modifications added] is having an impact," Gold said. "Most brand-name vendors do modify the base Android code before releasing their products."

Some white-box vendors can sell Android tablets unlocked at less than $100, Gold said.

With smartphones, meanwhile, the unlocked Android approach has enabled a number of newer manufacturers to enter the smartphone market by using a variety of lower cost, turnkey processes that rely on standard chipsets for processing and related functions, analysts from research firm IDC said.

That approach has helped the average selling price of a smartphone to fall to $337 globally in 2013, down nearly 13% from 2012, IDC said. By 2017, smartphone average prices should drop to to $265 globally. (The average selling price of the iPhone is $577, according to Gartner.)

Nexus smartphones, such as the Nexus 5, are close to the average selling price globally, although most experts place the Nexus phones at the high end in terms of features, such as large displays and fast processors. "Nexus smartphones have a lot of hardware bells and whistles at the high end to serve a select segment that includes tinkerers and people who like to mess around with Android," said IDC analyst Ramon Llamas.

These newer manufacturers adopting Android (although not necessarily basic Android) include Chinese smartphone vendors ZTE, Xiaomi, which recently hired Google executive Hugo Barra, and Yulong, which makes Coolpad smartphones like the Quattro 4G that ran Android 2.3 (Gingerbread) when it launched in late 2012 in the U.S.

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