The new Pixel smartphones have for once made a case of why Alphabet Inc (NASDAQ:GOOGL) should not exit the hardware business altogether. The fact that the company could sell up to 3 million phones in the fourth quarter followed by 5 to 6 million next year, should dispel the perception that the Pixel product line is on its deathbed.
Pixel Smartphones Resurgence
Analysts at Morgan Stanley believe the tech giant could have sold more phones had it inked more partnerships with wireless carriers. The phones are currently available only on Verizon Communications Inc. (NYSE:VZ) with the other carriers being forced to buy directly from Google or Best Buy Co Inc (NYSE:BBY). Given the limitation on this front, it is highly unlikely that the new Pixel smartphones will pose a challenge to Apple Inc. (NASDAQ:AAPL) and Samsung.
Packing the fastest processor out of Qualcomm in the name of Snapdragon 821 appears to have done the trick in triggering demand for Pixel 5-inch and 5.5-inch Pixel XL. The two smartphones also come with a highly rated camera similar to iPhone 7, in addition to having the company’s voice-driven digital assistant. Morgan Staley analysts believe the new phones could go a long way I boosting Google’s Android and Mobile search revenues.
Search Monetization
“We see Pixel’s unique artificial intelligence capabilities, deeper app integration, improved computing power and platform, and new hardware capabilities leading to higher Android user monetization (increased spend on smartphones) and higher mobile search monetization (as advertisers will spend more as users monetize higher),” said the analysts.
Google deciding to target the high end of the market by pricing the devices at $650 can be interpreted as a bold move as it looks to take on the big boys in the industry. However, it faces an uphill task to sell more than 200 million units that Apple and Samsung sell annually. Regardless, the pixel phones are expected to bring in $2.1 billion this year and $3.8 billion next year, a milestone achievement given they are not part of the company’s core business.
Alphabet stock was up by $5.56 in Tuesday trading session closing the day at a high of $785.79 a share