According to analysts, Pixel phones may not be a money-spinner anytime soon.
Revenue and Sales
According to the analyst Anthony DiClement of Nomura Alphabet, Google will be able to sell around 2.5 million of its Pixel phones during the coming year. This will generate revenue of around $1.8 billion. According to Morgan Stanley Brian Nowak, the forecast for Pixel devices is around 5.5 million in 2017, grossing revenue of around $3.8 billion. The average price and the features of the Pixel phone are directly aimed at the new iPhone and other top Android phones.
The initial sales of the new Google Pixel phones seem to be very strong. According to Wave7 Research, the Pixel phones contributed to 7.5% of the activations in Verizon a few weeks after the launch. According to Localytics, the Pixel phones have seen an increase of around 112% in activations during the Thanksgiving period, as compared to the preceding 4 weekends. However, the increase in percentage does not actually amount to much, as the base was rather low to begin with. This means that the number of devices being sold did not amount to much.
Pixel Helps Alphabet
According to the estimates made by DiClement from Nomura, the sale of Pixel devices to a sum of $1.8 billion will be able to generate around $100 or $200 for the operating profits in the year 2017, as compared to more than $27 billion towards the company. According to Nowak of Morgan Stanley, the gross profits are expected around $900 million. The profits from Pixel don’t seem to add much to the total of Alphabet’s profits, at least in terms of the coming few years.
Impact on Other Devices
What is to be seen is the impact of the Pixel devices on other Android devices made by other manufacturers. Google or Alphabet has now entered the hardware arena and this will surely pose a risk to other manufacturers, such as Samsung and other manufacturers making Android phones. However, these manufacturers don’t seem to have any other option and have to continue staying in bed with Google or Alphabet.
Designed by Google
While the other Nexus phones by Google were designed in combination with other hardware partners, the Pixel phones were completely designed by Google. Google has ventured into unchartered waters and has been more active in sourcing the components and managing the supply chain in case of the Pixel phones. It, therefore, has a lot to lose if the sales are not up to the desired levels. There is speculation from Morgan Stanley, obtained through Business Insider that the company’s decision of getting into hardware will result in revenue of around $4 billion in the coming year. Morgan Stanley expects that the sales of the Pixel phones in 2017 will come down to around five or six millions.
When the expected revenue of $4 billion is compared to the iPhone revenues, which is around $137 last year, Google’s revenue does not sound much. However, it is only a beginning for Google and the company does not possess the infrastructure that Apple offers through its retail stores.