Google and their new mobile phone

Source: New York Times, Miguel Helft and Jenna Wortham

Google plans to begin selling its own smartphone early next year, company employees say, a move that could challenge Apple’s leadership in one of the fastest-growing and most important technologies in decades.

Google’s new touch-screen Android phone, which it began giving to many employees to test last week, could also shake up the fundamentals of the cellphone market in the United States, where most phones work only on the networks of the wireless carriers that sold them.

The company, using the power of its brand, plans to market and sell the new phone directly to consumers over the Internet, and buyers would be able to sign up for service from any compatible provider, the employees say.

The introduction of a Google phone — manufactured to its hardware and software specifications by an Asian maker of handsets — would be an important and risky departure for Google. Until now, it has made software to power cellphones that are built and marketed by partners, and it has largely avoided selling hardware.

But analysts say it is not clear that Google’s success on the Internet will carry over into the design, marketing and distribution of hardware. Many companies have tried to make similar shifts and stumbled. Microsoft turned the Xbox into a hit, but when it pushed aside its partners in the music-player business in favor of its own Zune, it failed to gain traction against Apple and its iPods.

Google employees who spoke on the condition of anonymity...said that the device, manufactured by the Taiwanese company HTC, was thinner than Apple’s iPhone, with a slightly larger touch screen. It could be available as early as January, they said. Employees say the phone will be sold unlocked, meaning that buyers will be able to choose a service provider, and will be based on G.S.M. technology, which is used by AT&T and T-Mobile in the United States and by most other carriers around the world. It is named Nexus One, according to various reports and to digital traces that the phones have been leaving on Web sites.

Analysts say that the apparent shift signals a recognition by the company’s executives that Google needs to take more control of its destiny in the wireless world. “They perceive mobile as the next major opportunity,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein. “It is too big a risk to drive the strategy through their partners. They want more say and more control.”

In addition, analysts say that the iPhone, despite prominently featuring some Google services, makes the company nervous. In recent weeks, Google has unveiled a string of cutting-edge services for smartphones that run Android. They included an application that gives turn-by-turn driving directions, which Google is giving away free. A comparable application from the satellite navigation company TomTom for the iPhone costs $99.

Analysts say that Google’s gamble is a risky one, in particular because it could alienate Google’s Android partners, which include handset makers like Motorola and Samsung, and carriers like Verizon Wireless, Sprint and T-Mobile. It is not clear whether Google will team up with carriers to sell service plans for the phone, or whether Google will subsidize the devices in the hope of making up the difference with profits from mobile advertising.