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Why Investors Are Happy & We're Not

Why is Google suddenly so skittish about hardware?

The real answer to this question lies in: Why did Google get into hardware in the first place? After all, hardware is infamously high volume, low margin and comes with the hassle of stocking, technical support and returns. I believe the answer to this is it had no choice.

Typically hardware manufacturers are mind numblingly uncreative. When Apple launched the iPhone it caught all the major manufacturers off-guard because they had been asleep at the wheel. What initially followed was a desperate rash of pale imitations and it has taken a full three years for rivals to become genuinely competitive.


The same is true of PC makers who frantically copy any innovation they see and we end up with a mountain of look-a-like systems. In fact may I dare suggest Apple only looks such a design genius because everyone else is so comparatively poor?

The point is Google realised this. It released Android and all phone makers did was put it on mediocre hardware like the T-Mobile G1 (below) and treat it like a niche system. Google stepped in with the Nexus One more as a guide to manufacturers than as an end product for consumers. A "that's how you do it" demonstration which Schmidt admits was "to try to move the phone platform hardware business forward." In short Google didn't want to be in hardware in the first place, but it felt it had no other option.

Is Google's decision to return to being a software only company correct?

This is a harder question to answer. For one thing by pulling out of hardware it is showing a great deal of faith in phone manufacturers to keep making groundbreaking hardware (something HTC and Motorola do seem to be repaying), but it also suggests it thinks PC makers can get things right first time with Chrome OS. Why the difference?

In short because Android needed cutting edge hardware to show it off in its best light, while by contrast Chrome OS prides itself on requiring extremely modest hardware to get the best out of it. It is the most stripped down of operating systems with a sub five second boot time and - should Cloud computing take-off - it won't even require a hard drive, just a couple of gigs of solid state storage. With the netbook craze being one of the few areas of modest creativity in the PC sector Google will feel in safer hands.

All of which suggests the move by Google to pull out of hardware was inevitable. It makes sense from a purely business perspective and once again will make Google a lean, mean, software focused machine. What is more disappointing from a consumer standpoint, however, is that Google seemed genuinely good at hardware design. The Nexus One was a quantum leap forward for Android hardware and who knows what Google might have come up with had it made a 'Nexus Two', its own netbooks or even TVs?

So no doubt investors will be thrilled. You and I, considerably less so...

Links:
Nexus One Availability Google blog post
Eric Schmidt Interview via Telegraph

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