Google Phone May Rankle Android Partners

Partnering with Google has been mostly good for Frank Meehan. He's CEO of INQ Mobile, a U.K.-based cell-phone maker that next year plans to release a handset that runs Android, the operating system built from the ground up by a consortium of companies led by Google (GOOG). Google is lending considerable engineering talent, brand cachet, and marketing muscle to the project. Phones powered by Android are becoming best sellers for hardware makers including Motorola (MOT) and such carriers as Verizon Wireless and T-Mobile USA, the U.S. mobile-phone arm of Deutsche Telekom (DT). Meantime, developers are hard at work not only refining Android but also building thousands of games, tools, and other applications for Android devices. Now, Google is weighing a move that might turn it into a competitor to many of those partners. In a Dec. 12 blog post, the search giant said it's given employees "a device that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities." The device boasts a touchscreen that lets users search the Web by voice, and Google is in talks to sell the phone through T-Mobile USA. By itself, the prospect of Google marketing its own phone isn't causing Meehan much consternation. Indeed, a Google phone would raise Android's profile all the more, benefiting Google's partners. "I can understand Google wanting to showcase Android to the world," Meehan says. "If this helps consumers appreciate Android devices, then it's a good thing for us when we launch later." Open ThreatYet here's where Google getting in on the act could become a problem. If Google keeps the best new Android apps and features for its own phone, that would likely upset many of the 47 hardware, software, and chip partners that are part of the Open Handset Alliance, which backs Android. "If you lose an edge [to Google], it does impact you," Meehan says. IDC analyst Will Stofega is more blunt. "This could destroy the Open Handset Alliance," he says. Google declined to comment for this story, as did T-Mobile USA and HTC, which according to reports is the device manufacturer working on the Google phone. For now, many Google partners including INQ hope the move will strengthen Android. Even though Android has gained much traction this year, Google's Android head Andy Rubin told Bloomberg BusinessWeek on Nov. 2 that "there are still a lot of areas where we could do a lot better." With only 3.5% of the global market for smartphones, Android phones have yet to capture the popular imagination the way the iPhone has. Some Android phones run older versions of the software and don't offer the latest features. Others offer less processing power than the iPhone and run apps slower. "This might be Google's way of getting Motorola and others to ramp up their product road maps for Android phones," says Kevin Burden, an analyst at consultant ABI Research. Preeminent Android DeviceGoogle may simply want to create an Android device that runs circles around the iPhone in performance and spurs other manufacturers to introduce better gear as well. The Snapdragon chip from Qualcomm (QCOM) that the new device reportedly contains offers more processing power than the chip running the iPhone 3GS. "This is Google's opportunity to say, 'This is what our vision was all about,' " Meehan says. "My gut feeling is they are using it as a showcase. Hopefully, it just drives the uptake of Android." Chipmaker Nvidia (NVDA) says it's standing by Android. "We are a believer in Android, we'll continue to invest in it," says Mike Rayfield, a general manager at Nvidia. Still, Google may have to tread carefully to ensure its phone doesn't erode sales of partners' Android devices. Some consumers may hold off buying a phone until the debut of the Google device. Some partners may even switch allegiance to one of Android's rivals, such as Microsoft's (MSFT) Windows Mobile or today's No. 1 smartphone operating system, Symbian. "If you want to bring Microsoft [which has been losing share] back into the game, I can't think of a better way," says Jack Gold, principal at J. Gold Associates. Says Burden of ABI, "This is kind of playing with fire." The question is whether it's the kind that burns partners or kindles their competitive urge.

Before it's here, it's on the Bloomberg Terminal.