Google Nexus 4 – Horror story

Anyone who is trying to make money from selling Android devices will be looking at the Google Nexus 4 by LGE with horror.

• This new Android device has supreme specifications but is being offered at 70% of the price of similarly specified rivals.
• The device has a 4.7 inch screen, 2GB RAM, 1.5Ghz quad core processor which measures slightly better than the Samsung Galaxy SIII but is available in the UK at £279 (SIM Free) compared to the Galaxy SIII at £400.
• The reviews of this device are very good with the bottom line being massive bang for the buck.
• It comes as no surprise to learn that demand for the device has outstripped expectations by 10 times and once again LGE has run up against its old bug bear execution.
• LGE is ramping up production but I am certain that somewhere someone is sucking up a hefty loss on this device.
• At this price, the Samsung Galaxy SIII would destroy Samsung’s handset margin even including all the advantages that the company has of scale, distribution, logistics and brand.
• My bet would be that its Google taking the pain on this one, as there is no way that LGE could possibly have agreed to take a hit of this size.
• LGE has spent the last year or two balanced on a knife edge and it has neither the financial robustness nor the incentive to take the hit.
• Again this will all be about Google trying to make sure that it is its applications and its version of Android that is in the user’s hands so that the traffic that the device generates will be coming to Google’s servers.
• This gives Google the information on users that it needs to sell targeted advertising and to make a return on the money invested in Android.
• This is really bad news for all of the Android vendors as it will put further downward pressure on devices where everyone except Samsung is already struggling to make any money.
• This further confirms my view that Android is a bad place to be unless you have an edge that users are willing to pay for.
• Sony, HTC, Motorola, LGE and the like seem to believe that they have an edge but I see nothing that would make anyone pay over the odds for a device that looks and feels just like everyone else’s.
• The android shipment figures in 2013 are likely to look great but outside of Samsung, the operating profit line and cash flow are likely to be yet another horror story.