The Tablet Wars Got More Interesting With Nexus 7
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Google (NASDAQ: GOOG) unveiled its Nexus 7 tablet last week, the product got some really positive reviews; and it looks competitive both in terms of price and quality. Tablets are clearly a big market with enormous growth opportunities, and this last move from Google has important implications which should be closely followed by investors in the tech space.
The announcement came at a critical time, a few days after Microsoft (NASDAQ: MSFT) announced its Surface tablet. Microsoft´s product received some positive feedback from the critics, but there are still important pieces of information, like the price level, which were not disclosed. Google, on the other hand, seems to have put up a complete show which really got the critiques excited.
Joshua Topolsky from The Verge writes:
Google’s Nexus 7 isn’t just an excellent tablet for $200. It’s an excellent tablet, period. In fact, it’s the first Android tablet that I can confidently recommend to buyers — and not just because it’s got a low price tag (though that certainly helps). It’s a well-designed, powerful, and useful product, with lots of bells and whistles that makes it feel like a device that should be more expensive than it is.
There are still issues that need to be addressed — particularly around growing the tablet app footprint and expanding content offerings — but I don’t think those are deal breakers. The Nexus 7 delivers way more functionality than I expected, and it delivers it in a package that’s sleek, smart, and affordably priced.
Believe it or not, the last time I was surprised by a product with those same qualities, it was called the iPad.
Those with some experience following the industry know that positive reviews don´t necessarily mean a commercial success in this kind of products, so investors should pay more attention to the actual response from customers than to analyst’s opinion about it. However, the Nexus 7 has some real potential to become an important player in the tablets market, and this would have big implications for different companies.
If we talk about the tablet business, Apple (NASDAQ: AAPL) cannot be left out of the conversation. The new iPad sells for a starting point of $499, and the iPad 2 starts at $399, so Google is offering a materially lower priced product with Nexus 7. On the other hand, tablets are a new product category which has been practically invented by Apple, so Google still needs to cover a big distance until consumers can see a Nexus 7 as an alternative to iPad in terms of quality and functionality.
The high end of the market is relatively safely in Apple´s hands at this time, it has an enormous ecosystem and an irreplaceable brand power. A cheaper alternative like Nexus 7 could have an effect on iPad sales, but Apple is selling iPads as fast as they can be manufactured, and I wouldn´t expect that to change anytime soon.
Due to Apple´s remarkable success , there are iPads and “other tablets” on consumers’ minds, and that´s precisely where investors should put their attention right now; the effects of Nexus 7 on the lower priced segment of the tablets markets. The company which has more to lose if the Nexus 7 is successful is Amazon (NASDAQ: AMZN).
The online retailer was smart to launch its Kindle products at a reduced price point, instead of trying to compete against the powerful iPad, Amazon figured it should try to capture the existing demand for lower priced alternatives, and it has been quite successful in that niche.
Kindle uses a modified version of Google´s Android operating system, but Amazon decided to to build its own ecosystem and applications around it instead of allowing Google to capture those benefits. Basically, Amazon uses Android for free, and Google gains nothing from it.
But Google is back with a vengeance now, a competitive tablet at a similar price point and looking like it has a lot to offer to consumers. Users of Android operating system for smartphones are already familiar with Google´s ecosystem, and that´s a lot of people considering that Android is the biggest smartphone platform in the world. If Nexus 7 lives up to expectations, Amazon and its Kindle could be its first victims.
Nexus 7 could also kill Microsoft´s chances to enter the mobile era with a successful product even before investors have time to build some hopes about it. The power of Google´s ecosystem is a big advantage over Microsoft in mobile, so Mr Softee would have to launch a much better product to recover the distance it has lost over the years. Based on what we have seen so far, Nexus 7 looks better than Surface, so Microsoft doesn´t seem to be in a good position to compete.
Being a Google shareholder is not easy; the company many times invests heavily in projects with little or no economic impact over many years. But then you see the advantages a product like Android – which Google distributes freely – has when it comes to building an ecosystem in smartphones and tablets, and in the long term those investments make much more sense.
acardenal owns shares of Apple and Google. The Motley Fool owns shares of Apple, Amazon.com, Google, and Microsoft. Motley Fool newsletter services recommend Amazon.com, Apple, Google, and Microsoft. 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.If you have questions about this post or the Fool’s blog network, click here for information.
