A Google Phone Could Cause a Lot of Static

Google (GOOG) has invested a lot of time and money in building a broad alliance of companies to support Android, its operating system for mobile phones. The Open Handset Alliance now totals 47 members, including hardware, software, and chip companies. Now Google is considering a move to sell its own phone, which risks undermining the coalition. Phonemakers such as Motorola (MOT) and Samsung, in particular, could begin to see Google as more rival than ally if the search giant starts selling a product head-to-head with theirs. "This could destroy the Open Handset Alliance," says program manager Will Stofega of market researcher IDC.

Google hasn't confirmed it plans to sell its own phone. The company, in a Dec. 12 blog post, only says it has 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." Still, partners suspect Google will launch a phone next year. It could sell the device directly to customers, but Bloomberg BusinessWeek has learned that Google is also in talks about distribution with T-Mobile USA.

Google may need to sell its own smartphone to better compete with Apple, which has an early lead with the popular iPhone. To ensure its place in the emerging world of mobile computing, Google has to have a large number of people using Android phones and a broad community of developers to come up with applications. Frank Meehan, chief executive of INQ Mobile, a British company that plans to release an Android phone next year, says a Google phone could benefit the whole market. "If this helps consumers appreciate Android devices, then it's a good thing for us when we launch," he says.

But Meehan and other partners also have concerns. If Google keeps the best new Android apps and features for its own phone, it could have an unfair edge. Michael Thompson, a senior vice-president at Android app developer Nuance (NUAN), says it's "very likely" that some phonemakers will drop Android if Google gets into the handset business. Some partners may switch allegiance to Android rivals, such as Symbian, the operating system backed by Nokia (NOK), or even the declining Microsoft (MSFT) Windows Phone. "If you want to bring Microsoft back into the game, I can't think of a better way," says Jack Gold, principal at technology research firm J. Gold Associates.

Kevin Burden, an analyst at consultant ABI Research, says Google may believe it can best showcase Android's capabilities and thereby motivate its partners. But it should recognize the risks, too. "This is kind of playing with fire," he says.

With Crayton Harrison

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