Google Steps Up to Apple in Mobile Market

Joel Anderson  |

It was a big day for Google (GOOG) news on Tuesday. And to clarify, that means news about Google rather than the company's news oriented search engine. Google announced that it was investing another $300 million to build a new data center in Council Bluffs, IA, bringing the total amount of money put into the midwestern town at $900 million. The day also saw Eric Schmidt, executive chairman, appear in court to defend the company's Android system against claims from Oracle (ORCL) that it illegally makes use of Java systems programming.

However, potentially the biggest piece of news for the Mountain View, CA-based company began offering its newest Android phone, the Galaxy Nexus made by Samsung Electronics (SSNLF), through its online store, representing a direct retail approach that could be the beginning of a trend.

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Google Entering Retail Phone Market

The Galaxy Nexus will be offered for $399, a higher price than most smart phones, but it is "unlocked," meaning that it comes without a wireless contract. Users can purchase the phone without locking themselves into a wireless carrier. Google entered the smart phone market and into a rivalry with Apple (AAPL), maker of the immensely popular iPhone, by licensing its Android operating system (the target of the Oracle lawsuit) to mobile phone makers for free. The company then generates profit by selling ad space on mobile devices.

Google has previously made a stab at the same strategy, offering the Nexus One through its online store for $529 in January of 2010, but it failed to break the hold carriers have on the smart phone market. Now, can take a cut from any direct sales, helping the company reach the $2.5 billion in annual revenue from mobile sources that it has projected. This would represent 5 percent of total revenue.

Tablet Coming Soon

The move to offer the Nexus Galaxy directly consumers comes ahead of the release of the highly-anticipated Nexus tablet. The new tablet represents an effort to compete with Apple's iPad. Android is the leading operating system among smart phone, but it's still far behind iOS among tablets. Google hopes that the new 7-inch Nexus tablet, set to retail at $199, will allow it to penetrate further into a market already dominated by Apple.

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