Study claims Google will sell 5m phones this year

From: StrategyEye
By Andrew McDonald
14th January 2010

Google's Nexus One phone is set to sell 5m units this year and account for 0.4% of the world phone market, but will grow more slowly than the iPhone, according to data collected by finance site Trefis. However, the study claims the unit will account for 9.34% of Google's stock price, contributing more than Google's YouTube division or its app store Android Marketplace. Google's current market cap stands at about USD186bn.

According to the forecast, Google's Nexus One phone will account for 1.4% of the handset market in three years and 3.4% of the world's phone market by 2016. In contrast, the iPhone had a 2.2% market share in 2009 after two and a half years.

Trefis doubts the Nexus One will have the same sales response as the iPhone because Apple's device "had a novelty factor while the Nexus One is following the concept and design bar set by the iPhone". The forecast also notes that Apple's retail strategy and the media attention attracted by customers queuing outside Apple stores worked to its favour. In contrast, Google’s device is only available to buy online. A comparative shortage of Android apps could also play a part, with Google currently offering a fifth of the applications available at the Apple App Store.

The research predicts the price of the Nexus One will drop over time, with subsequent phone releases being brought in at different price points. This will have a knock-on effect on margins, with Trefis predicting that the EBITDA margin on the phone will drop from 43% in 2010 to 15% by 2016.

At its launch price of USD530, Trefis estimates Google is making a gross profit of USD231 per unit. The figure takes into account iSuppli's recent estimate that Nexus One components cost USD174, while adding on additional assumed costs including warranty and R&D costs of USD50 and HTC's profit of USD75. Marketing and selling expenses are estimated at an additional USD50 per unit.